The U.S. Economy Probably Grew After All, Thanks to Oil

The tanker Eagle Seville at the Port of Corpus Christi in Texas Photograph by Eddie Seal/Bloomberg

There were big headlines—here and elsewhere—after the government reported on Jan. 30 that the U.S. economy shrank in the fourth quarter.

Never mind. A little more than a week later, surprisingly good trade figures today are leading economists to predict that the government will revise its gross domestic product estimate for the last three months of 2012 into positive territory.

The Department of Commerce said the trade deficit shrank 21 percent to about $39 billion, the smallest trade gap since January 2010. Oil was the biggest factor. The U.S. imported the fewest barrels of crude in almost 16 years, while fuel exports actually rose.

Commerce’s Bureau of Economic Analysis releases its first estimate on quarterly GDP growth just a month after the quarter ends, so it’s forced to make assumptions and extrapolations to fill in for missing data. The accuracy of its estimate improves as more complete information arrives.

Economists quickly incorporated the new figures into their GDP estimates. Macroeconomic Advisers (briefly) estimated that the economy grew at a 0.7 percent annual rate in the fourth quarter.

“The U.S. trade balance improved dramatically at the end of last year,” UniCredit economist Harm Bandholz wrote to clients.

Wait, though. That wasn’t the end of things. Shortly after putting out better-than-expected trade data, the government released worse-than-expected data on wholesale inventories. Macroeconomic Advisers’ Ben Herzon said incorporating inventories would probably reduce its growth estimate to roughly 0.4 percent to 0.5 percent. Barclays estimated 0.3 percent. JPMorgan Chase economist Daniel Silver wrote to clients: “Our tracking estimate of 4Q GDP growth is now at 0.2%.”

The net of the flurry of revisions is that the economy probably didn’t really shrink in the fourth quarter after all. On the other hand, it didn’t grow much, either.

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