GDP’s Upward Trajectory

There are already indications that GDP will bounce back in the second quarter.

The Bureau of Economic Analysis, which tracks U.S. quarterly GDP for the government, always releases three numbers over the course of about two months, revising them further each time. The third estimate is the final one, and it goes down as the historical record as the official growth for the quarter. According to the BEA, it’s based on more complete source data than were available for the second estimate, which in turn is based on more complete data than the first estimate. Yet first estimates tend to get the most attention, regardless of whether they’re a bit too low or a bit too high for comfort. The second estimate gets attention mainly if it’s the sign of a lousy quarter.

That was the case in the first quarter of 2015, which the BEA previously reported as suffering an annualized contraction of 0.7 percent. The third estimate, however, which was published on Wednesday, ameliorated the previous report a bit by finalizing the number as an annualized contraction of 0.2 percent, or just on the negative side of stagnant. A number of factors conspired to drive GDP down in the first quarter, according to the BEA. One particularly potent force was the strong dollar, which squeezed exports, especially of capital goods such as autos and auto parts. Investment in “mining” was also down, by which the government means any kind of mineral extraction from the ground, including oil and gas wells — and that industry is having to adjust to low energy prices.

Underlying some of the drop was also the bitter winter that much of the country endured. Even so, a number of other kinds of contributions to GDP grew in Q1. Consumer spending on services rose, especially health care (which is always rising some) and housing (the cost of which has been rising slowly but steadily since the end of the recession). Businesses also made more inventory investment in the first quarter. What does it mean for the various forms of real estate? One quarter an economic trend does not make, so unless GDP starts contracting in a sustained way — that is, there’s a recession — commercial property owners and managers probably don’t have to worry.

Besides, there are already indications that GDP will bounce back in the second quarter. Maybe not to stellar growth rates, but at least back to a post-recession “normal.” For one thing, since 2011 every weak quarter has been followed by a stronger quarter. That happened in the fourth quarter of 2012 and especially the first quarter of 2014 — a time marked by a worse winter than even 2015 — when an annualized contraction of more than 2 percent bounced back to expansion of more than 4 percent, two quarters in a row. So far in the second quarter of 2015, economic indicators are mixed, but some of the most important ones, such as job growth, are very much positive. The Q2 BEA estimates, which will be out in July and August, will probably show growth again.