Well it’s official. The Q1 preliminary GDP report, released this week, showed the broad extent of the economic damage from a combination of a rising dollar, drop in oil prices, and another winter for the record books. The question now is how much of the growth slowdown over the last two quarters is due to transitory impacts from bad winter weather, or timing issues on the negative and positive impacts from lower oil prices? And how much may be due to more structural problems-a combination of the stronger dollar and weak global economy, or evolving demographic and productivity changes that could weigh on U.S. economic growth for a much longer time.
Until we get more post-winter data, it will be difficult to disentangle the temporary from the more permanent. I expect this will keep the FOMC cautious and data-dependent throughout the second quarter. All we know at this time: The first quarter was another incredibly weak quarter for the U.S. economy, and the second quarter is shaping up to be another disappointment as well.
Read more on this week’s report here.Tags: economy