U.S. GDP declines in Q1

After first reporting a dismal first quarter GDP growth rate of +.2% in April, the Commerce Department issued a revised, second estimate for the U.S. economy’s performance from January-March of -0.7%.

A larger trade deficit, smaller business inventories, and less consumer spending than initially predicted, all contributed to the downward adjustment of nearly a full percentage point.

Macroeconomic experts are predicting between a 2-2.5% gain for GDP growth in Q2, which would still make for the worst first-half performance by the U.S. economy since 2011.

Economists have pointed to a stronger U.S. dollar (which weakens export sales), and a fall in gas prices (leading to a reduction in energy exploration investment by 48%), as the main culprits of a slowing U.S. economy.

Consumer spending (2/3 of the overall economy), also grew by only 1.8% in Q1, largely on account of the unusually cold and snowy weather conditions for much of the northern U.S.

Despite the bad numbers, the summer travel season could cause a big spike in growth for the main sector of our economy this year, as gas prices are lower by $1 per gallon ($2.74) compared to this time last year. Year-to-date, consumer spending hasn’t realized the benefits of cheaper travel costs.