The U.S. economy slowed sharply in the first three months of 2015, growing at a disappointingly slow annual rate of just 0.2 percent, the government reported Wednesday.
Mainstream economic forecasters had originally projected sub-par growth for the quarter closer to 1 percent, but after a soft jobs report in March began revising down their already low expectations. Hence Wednesday’s weak number from the Commerce Department for gross domestic product, the broadest measure of U.S. economic activity, came as no surprise.
“The U.S. economy stumbled badly in the first quarter of 2015,” Scott Anderson, chief economist of Bank of the West in San Francisco, said in analysis of the GDP report. “Modest GDP growth in the fourth quarter (+2.2 percent) turned to virtually no growth in the first quarter of 2015 (+0.2 percent). The fingerprints of a strong U.S. dollar and worse than expected winter weather were all over the report.”
As Europe and Japan follow the U.S. blueprint and take unconventional steps to boost their sagging economies, the U.S. dollar has strengthened. That makes the purchasing power of Americans stronger, but it’s a punch in the gut to U.S. exporters, whose products, whether grains or airplanes, are now more expensive in the global marketplace.
Harsh winter weather didn’t help, keeping many consumers on the sideline in January and February. And a West Coast port strike hurt trade more broadly in the quarter.
“U.S. exports dropped (-7.2 percent) with goods exports falling a whopping (-13.3 percent) at an annualized pace,” said Anderson. “The West Coast port slowdown obviously had an impact on U.S. exports and imports, implying a one-off event that could fade in the quarters ahead.”
GDP numbers are generally revised upwards or downwards weeks later after more data comes in to the Bureau of Economic Analysis. Mainstream forecasters are now projecting second-quarter growth to be stronger, in the 2 percent range, although some data within Wednesday’s number points to weaker growth this quarter.
Businesses replenished their inventories at a pace that accounted for most of what little growth there was in the first quarter, said Doug Handler, chief U.S. economist for forecaster IHS Global Insight. Inventories may drag against growth in the period of April through June.
“The anticipated second quarter rebound will still occur, but it will be far more muted than originally anticipated,” said Handler.
The White House said the economy weathered the weather earlier this year, which was plain awful by historical standards.
“The historical relationship between weather and first-quarter growth suggests that weather may have reduced annualized growth by about a full percentage point this quarter,” said Jason Furman, chairman of the White House Council of Economic Advisers.
There should be a snap-back in the second quarter, he said, cautioning that other factors were at play too such as households saving rather than spending much of the windfall from lower gasoline and energy prices. Still, the White House remained optimistic.
“Over the past four quarters, the most persistent and stable components of GDP — consumption and fixed investment — have grown 3.3 percent,” noted “This trend complements the strong pace of job growth and unemployment reduction over the last year.”
Republicans, who hope to capture the presidency next year, were quick to pounce on the weak number.
“These dismal numbers confirm the ongoing struggles many hardworking American families continue to face in this stagnant economy,” said Sen. Dan Coats, R-Ind., chairman of the Joint Economic Committee of Congress. “Our economic policies should aim to not only provide economic relief for consumers, but encourage industries and businesses to grow and invest.”
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