Economy Shrinks in Q1; Annual Growth Still Stuck in the Doldrums


Today brings disappointing economic news. The economy didn’t just grow slowly in the first quarter, it actually shrunk by 0.7 percent. As usual, winter weather is getting part of the blame, and some economists are going even further, wondering if we need to step back and take a look at the formula for seasonal adjustments. Perhaps, for some reason, the formula is no longer reflecting reality during the winter quarter.

Maybe. But what this shows is that although the US economy continues to putter along in decent shape, it still hasn’t reached takeoff velocity. The economy has been growing at a rate of 2-3 percent per year for the past five years, and there’s little evidence this is going to change anytime soon.