The economy took a huge dive in the first quarter. It grew at such a slow annualized rate, 0.1 percent, that I had to enlarge my usual FRED chart just so you could see the tiny bar on the far right. The full BEA report is here.
So what happened? Consumer expenditures actually increased reasonably well. Government consumption was about flat, which isn’t too unusual these days. But fixed investment—including housing—tanked, inventories shrank, and exports plummeted. That was enough to swamp the strong gains in consumer spending.
It’s hard to draw any positive conclusions from this. Cold weather is getting some of the blame, but I always take weather-based excuses with a big grain of salt. Basically, the economy is still really sluggish. Job growth is OK but not great and wage growth is positive but only barely. Despite that, here’s what the Wall Street Journal has to say:
The latest figures come as Federal Reserve officials conclude at two-day meeting Wednesday. The numbers aren’t likely to have a large influence on policy, given the expectations for improved growth later in the year. Officials, however, are closely monitoring inflation measures. Persistently low inflation could complicate the Fed’s decisions about how to wind down its bond-buying program this year and when to raise benchmark interest rates from near zero.
Yeesh. Crappy GDP growth, sluggish job growth, and persistently low inflation “aren’t likely to have a large influence on policy.” Then what the hell would have a large influence on policy? Needless to say, a GDP report like this is music to Republican ears, so we certainly can’t expect Congress to react in any productive way. That means the Fed is all we’ve got. But apparently we don’t have them either.