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More Troubling Economic Signs

Lost amid the news coverage of the Supreme Court was another round of troubling economic statistics from the government:

U.S. consumer spending and export growth were not as robust as previously believed in the first quarter, suggesting less momentum in the economy.

The Commerce Department confirmed on Thursday that the economy grew at a 1.9 percent annual pace in the January-March period, but the mix of growth was not encouraging for the current quarter.

A separate report showed the number of Americans filing new claims for jobless benefits fell last week, but remained too high, indicating the job market was struggling to gain traction.

(…)

Consumer spending, which accounts for about 70 percent of U.S. economic activity, increased at a 2.5 percent rate in first quarter, rather than the previously reported 2.7 percent pace.

There are signs that consumer spending slowed in the second quarter, with retail sales falling in April and May.

Exports grew at a 4.2 percent rate instead of 7.2 percent. The loss of momentum in both consumers pending and exports bodes ill for second-quarter growth.

Second-quarter growth is forecast around 2 percent, but with global demand cooling amid Europe’s debt woes and an uncertain fiscal policy path at home forcing households to be cautious, even that estimate might be too optimistic.

Business inventories increased $54.4 billion, instead of $57.7 billion, adding only 0.10 percentage point to GDP growth compared with 0.21 percentage point in the previous estimate.

Excluding inventories, the economy grew at a revised 1.8 percent rate in the first quarter, rather than 1.7 percent and up from 1.1 percent in the fourth quarter.

The careful of management of inventories could be a boost to second-quarter growth, but if domestic demand weakens further, businesses might be forced to scale back on restocking.

That is a likely prospect as the labor market struggles to find momentum.

Initial claims for state unemployment benefits fell 6,000 to a seasonally adjusted 386,000, the Labor Department said. The four-week moving average for new claims, considered a better measure of labor market trends, slipped 750 to 386,750.

All of this is pointing to signs that the Second Quarter is likely to be just as weak as the first, which raises interesting questions for job growth and the election. This is hardly the kind of news an incumbent President wants to receive only five months away from Election Day.

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About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May, 2010 and also writes at Below The Beltway. Follow Doug on Twitter | Facebook

Comments

  1. C. Clavin says:

    the economy doesn’t matter…the election is about health care now.
    santorum was right…romney was the worst choice of all the clown car occupants to run against obama. for the next four months romney is going to have to crap on the only thing he did right as a governator. and all during that time he won’t be able to brag about how he devistated entire communities in the quest for profits.

  2. @C. Clavin:

    I’m not sure the health care issue has legs. Sure, Republicans made responses today, but they seem oddly out of sync.

    Maybe it’s because they’ve just spent a few months beating up on Obama, saying it was a huge failing for him to focus on health care and not the economy?

    Now they want to switch?

  3. Dave Schuler says:

    Nah, jp is right: it’s still the economy, stupid.

  4. anjin-san says:

    Fox was pushing the “market tanks in response to Obamacare” meme hard this morning, but -25 points is hardly earthshaking. Certainly the recovery continues to be anemic, but then it also continues to be a recovery, which I prefer to that which proceeded it. There are also concrete signs that the real estate market is stabilizing, which is very good news indeed.

  5. superdestroyer says:

    When one looks at the direction that government policy is developing in the U.S., it should be safe to conclude that economic conditions will have little to no effect on elections. Do you really think that the million of people awaiting their “Free healthcare” from the government are concerned.

    If a pundit wanted to be forward thinking, the real discussion is how do Democratic Party candidates for the presidency or the Senate distinguish themselves from each other. when no disagreement is allowed on issues and issues like education, jobs, the economy, immigration cannot be discussed.

  6. Jeremy R says:

    @anjin-san:

    Fox was pushing the “market tanks in response to Obamacare” meme hard this morning, but -25 points is hardly earthshaking.

    Yeah, it’s silly. The DOW was down like 160 just before the ruling, and by the end of the day it had recovered over 100pts, partially on the gains in hospital network stocks. Today it’s up over 200pts more. Some tanking.