Wednesday, July 30, 2014

GDP Report Points to Weather

The high GDP report for the second quarter reinforces the thought that the slowdown in the first quarter was mostly caused by inclement weather and the risk of a government shutdown. U.S. GDP is estimated to have gone up 1.0 percent during the quarter, which is reported as an annualized rate of 4.0 percent. That’s faster than the U.S. economy in its current state can expand in a continuous way, so much of it must just be a recovery from the problems of the previous quarter.

The weather is favorable for the third quarter also, with few weather disasters so far and bumper crops expected unless the weather changes in a big way in the next 6 weeks. Agricultural production isn’t such a big component of the U.S. economy, but it is big enough that weather like this can boost the third quarter GDP measures when they come out.