GDP shrinkage: George Costanza economy Part 2! (Video)


GDP reported this morning at an annual ‘growth’ rate of -2.9%!

Last month when the Bureau of Economic Analysis (BEA) estimated that 1st-quarter GDP would actually drop 1% we asked the question whether the US economy was facing a condition that plagued George Costanza after swimming in a cold pool?

In other words rather than expansion was the US economy actually contracting or shrinking?

Now, after-the-fact, is that the case or was today’s reading on GDP simply an anomaly or detour on the road back to  economic growth?

We also questioned the popular and widespread thesis that much of the weakness in the US economy was due to harsh winter weather and wondered if the Fed would ever be able to raise rates very far above 0%?

Because the actual GDP number released this morning actually showed an annualized drop of 2.9%, we thought we would rerun the article titled:

‘The US: Do we have a George Costanza economy?’

Much like George blaming swimming in a cold pool for his shrinkage, can the negative 1% reading in GDP actually be attributed to weather?

 

Much of the blame for any of the current economic weakness in the United States is being placed on harsh winter weather as in this note from AP:

The U.S. economy was battered even more than first suspected by the harsh winter, actually shrinking from January through March. The result marked the first retreat in three years, but economists are confident the downturn was temporary.

Now call me cynical but as the saying goes one of the two best jobs in America is economist (the other being meteorologist) because they are so often wrong and with no apparent recourse.

The fact of the matter is that after trillions of dollars injected into the economy through quantitative easing, the growth in the US economy pre-harsh winter weather was sluggish at best and extremely disappointing and worrisome at the worst.

The question then is that if we give the economists the benefit of the doubt this time and accept their explanation for economic weakness this time as gospel, what exactly will growth look like going forward now that the weather has improved?

Can the Fed ever taper if stimulus has really not done the trick to this point? And will throwing more money at the problem by continuing QE actually solve the problem?

Maybe we should ask a meteorologist for their opinion?

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