Last week’s surprising report that the value of all the goods and services produced in America did not grow in the first quarter, which will be subject to two revisions as firmer data come in, tells us one of two things. Either the American economy has stopped growing, or the GDP figures, which have reported zero or nil first-quarter growth for the past thirty years, reflect flawed seasonal adjustments. Michael Gapen, chief U.S. economist at Barclay’s, suspects the latter. And The Economist only half-wryly comments, “If only America could abolish the first quarter, its economy would look so much better.” So last week’s GDP report is not very helpful, taken alone. Nor is the reaction of the Federal Reserve Board’s monetary policy committee. Chairwoman Janet Yellen recognised the weakness but put part of the blame on the “transitory effects” of “transitory factors”. Which is why we have to troll through a variety of other data to separate those transitory factors from the underlying trends in order to decide whether, like the British, we are experiencing a pause before resumption of growth, or an exhausted recovery.
There are reasons for pessimism. First, the news from the rest of the world is worrying.
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