In songwriter Paul Simon’s words, U.S. economic growth in the first quarter is “slip slidin’ away” with each passing day.
It now looks like the world’s largest economy contracted in January through March instead of eking out a 0.1 percent gain at an annualized rate as reported by the Commerce Department last week. The latest knock came from data issued today. Although the trade deficit shrank in March to $40.4 billion from $41.9 billion as exports grew, the narrowing was less than the government had projected when putting together the advance estimate on gross domestic product.
Those figures, combined with previous reports on construction spending, inventories and revisions to retail sales, mean the economy probably reversed course in the first three months of the year. The bad news won’t last long, though, as many of the same analysts that are notching down first-quarter growth rates are also marking up forecasts for this quarter.
“Overall, we remain relatively optimistic about the outlook,” said Gregory Daco, a senior U.S. economist at Oxford Economics USA in New York, which now estimates GDP shrank at a 0.6 percent annualized rate in January through March. “We’re not too far from the bottom, hopefully, in terms of revisions.”
The Commerce Department’s advance GDP report last week showed declines in business investment, housing and government spending, along with the trade deficit, held back growth at the start of the year. Some economists blamed unusually harsh winter weather for the slowdown and projected a pickup this quarter.
Oxford Economics, for example, is penciling in a rebound to a 3.6 percent rate of growth from April through June, said Daco.
Other economists’ GDP estimates are in sync with that of Oxford Economics. Morgan Stanley’s tracking estimate for the first quarter was minus 0.5 percent following today’s trade report. They project a rebound to 3.7 percent this quarter. Goldman Sachs Group Inc. was at minus 0.6 percent for the first quarter and Pierpont Securities was at minus 0.3 percent.
“Odds favor further downward revisions when the wholesale and retail inventory data for March are released over the next week,” Pierpont Securities’’ chief U.S. economist Stephen Stanley wrote in a note.
Downward revisions to retail sales got things off to a bad start less than two hours after the GDP data were released on April 30. That update showed purchases slumped 0.9 percent in January instead of the 0.7 percent decline previously estimated. Better readings in February and March weren’t enough to make up for the shortfall.
Then came the May 1 figures on construction spending that showed outlays dropped 0.2 percent in February instead of rising 0.1 percent as previously estimated. The March reading was also disappointingly small at a gain of 0.2 percent.
A day later, data on factory orders showed inventories climbed less in March than the Commerce Department had forecast.
Revised GDP figures from the department are due May 29.