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If first-quarter gross domestic product growth comes in a little slower than expected, one area to look at might be international trade. The U.S. Bureau of Economic Analysis reported on Thursday that the trade gap widened to $42.3 billion in February, an increase of about 7.6 percent from January. Economists polled by Bloomberg expected the trade gap to fall about 2 percent on the month to $38.5 billion, so first-quarter GDP projections are being edited in light of the data.
Before the release of the trade data, economists were expecting first-quarter GDP to expand at an annual rate of about 1.4 percent. Unusually severe winter weather in much of the U.S., which created economic friction, had already been factored in, as had the taper. After the trade data, first-quarter GDP growth estimates fell to an annual rate of about 0.9 percent, which is a fairly significant downward revision.
But the estimate is subject to change as data for March begin coming in. Economists will generally make their first stab at GDP growth before trade data is reported because there is such a long delay in the release of the information. March trade data won’t be available until May 6, well past the time people will have moved on to speculating about second-quarter and first-half 2014 GDP growth. More importantly, the March Employment Situation report will be released on April 4. Economists are expecting strong nonfarm payroll growth of about 206,000, but economists have missed payroll estimates before.
The overall economic outlook — as measured by Gallup’s Economic Confidence Index — is still negative, but there is optimism in the ranks. Retail sales data showed some traction in consumer spending, which can account for as much as 70 percent of GDP. Following the release of strong retail sales data from the U.S. Department of Commerce, TD Securities deputy chief economist Millan Mulraine went as far as to say that ”The consumer appears to be back in the game,” adding that ”the underlying momentum in the economy remains quite favorable.”
Some economists have argued that as businesses and consumers recover from the severe winter, business activity and consumer spending will pick up again. The job market has, ostensibly, continued to recover, although growth has sometimes been superficial. There is something to be said about the release of pent-up consumer demand, but it’s unclear if that spending, whatever it may be, will be significant. The spending of tax refunds could give the headline number a kick, but short-term stimulus doesn’t really do anyone any good.
Data from abroad suggest headwinds in overseas economies as well, suggesting that foreign demand for U.S. goods could remain subdued in the near future. Perhaps most troubling are reports about a downshift in Chinese economic growth, which is agitated by fears of instability in the country’s financial market. Exports to China fell 4.6 percent on the month in February.
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