Winter Chill Took a Bite Out of U.S. Growth in First QuarterMichelle Jamrisko and Catarina Saraiva
The economy in the U.S. is experiencing déjà vu. For the second consecutive year, Old Man Winter nipped the economic expansion.
Harsh weather subtracted 0.5 percentage point from growth in the first quarter, according to the median estimate in a Bloomberg survey of 37 economists conducted from March 30 to April 1. Gross domestic product expanded at a 1.5 percent annualized pace in the first three months of the year, the poll showed, after growing at a 2.2 percent rate at the end of 2014.
Almost half, 49 percent, of those surveyed said the major reason for the slowdown could be traced back to the frigid temperatures and snow that blanketed much of the country in February. And just like in 2014, when bad weather caused the economy to shrink at a 2.1 percent rate from January through March, the economists said the slowdown will prove temporary.
“We’ll see a very weak first quarter like we did last year, but second and third quarters should be very, very strong,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who was among the 18 analysts projecting colder temperatures shaved 0.5 percentage point from first-quarter gross domestic product.
The economic data in early 2015 has been the most disappointing in years, with retail sales slumping in January and February, residential construction weakening and manufacturing cooling. A rebound in auto demand last month is the first sign that the data are about to take a turn for the better heading into the second quarter.
“The consumer will do most of the heavy lifting for the economy in the second and third quarters,” Sweet said.
Cars and light trucks sold at a 17.1 million annualized rate in March, exceeding the 16.9 million median forecast of analysts surveyed by Bloomberg and up from 16.2 million in February, industry data showed Wednesday.
In the region from the Mississippi River to the East Coast, Americans in 23 states lived through a “top-10-coldest February,” according to National Oceanic and Atmospheric Administration data that start in 1895. It was the snowiest month on record for Boston, while record-low temperatures for any February were reached in Chicago, Buffalo and Cleveland.
Growth will accelerate to 3 percent in the second quarter, according to a separate Bloomberg survey of 75 economists taken last month.
The weather wasn’t the only issue holding back the world’s largest economy last quarter. Thirty-two percent of respondents offered other explanations as to why GDP growth was slower than it should have been, including lower energy prices, volatility in business stockpiles and sluggish wage growth.
Another 27 percent said the culprit was weaker global growth and a strong dollar, while the remaining 16 percent pointed to supply delays caused by the labor dispute at West Coast ports.
Economists at the Federal Reserve Bank of Chicago researching the impact of weather during the 2013-14 winter said it proved to have a “significant, but short-lived, effect on economic activity.” Utilities, construction, hospitality and retail were among the industries disproportionately affected, the March 25 report showed.