WASHINGTON – It turns out the U.S. economy can withstand a cold snap after all.
In early 2015, near-record-low temperatures and howling snowstorms in the Northeast appeared to keep shoppers indoors and to slow the U.S. economy to a near-stall.
But newly released revised government data now suggests that the economy was much more resilient. The updated estimates by the Commerce Department conclude that the economy expanded at a 2 per cent annual rate in the January-March quarter of 2015, far more than the previous estimate of 0.6 per cent.
That sharp increase was nearly offset by another revision: The economy expanded at a modest 2.6 per cent annual rate in last year’s April-June quarter, the department now says, down from a previous robust estimate of 3.9 per cent.
In short, rather than a slow-motion expansion in the first quarter of 2015, followed by a robust bounce-back, economic growth occurred more evenly across both quarters.
The new figures, which update the government’s growth estimates for 2013 through 2015, address one quirk evident in the data for several years: Growth has generally been much slower in the first quarter than the remaining three. That pattern now appears less pronounced.
Otherwise, the Commerce Department’s revisions don’t significantly change the U.S. economy’s modest growth trajectory over those three years: The economy grew at an annual average pace of 2.2 per cent, up just one-tenth of 1 percentage point from the government’s previous estimate.
Still, the current recovery from the 2008-2009 Great Recession remains the slowest rebound since World War II.
Every year, the department’s Bureau of Economic Analysis revises several years of data measuring gross domestic product, the broadest gauge of the economy. GDP seeks to measure all goods and services produced in the U.S., from autos to mobile phone data plans to restaurant meals.
The revisions are based on new information, such as IRS tax data that wasn’t available when the numbers were previously compiled. More comprehensive annual survey data on retail store sales, construction spending, and state and local government spending are also incorporated.
BEA officials have acknowledged that the pattern of sluggish growth in the first quarter, followed by healthier gains, points to problems in its seasonal adjustments. Seasonal adjustment is the process by which economists seek to exclude the impact of regularly occurring events, such as the drop-off in retail sales that follows the winter holidays.
The government has taken several technical steps to update its seasonal adjustment methods, BEA officials said at a press conference. For example, it is adjusting state and local government construction spending on a quarterly basis, rather than just monthly.
The changes have lifted average growth in the first quarter from 2013 through 2015 to 1.2 per cent, up from just 0.5 per cent before the revisions. Average second-quarter growth is now 2.5 per cent, down from 3.2 per cent, and third-quarter growth is 3.4 per cent, up from 3.1 per cent. Fourth-quarter growth in those three years remains 2.4 per cent, on average, the same as before.