The Associated Press's unbylined coverage of the Census Bureau's April retail sales report — sales rose 0.1 percent, falling far short of consensus expectations of 0.4 percent, a result Reuters predictably called "unexpected" — slipped in a sentence that had me rubbing my eyes.
In early May, after the government announced that first-quarter gross domestic product growth came in at a barely perceptible annual rate of 0.1 percent — the equivalent of a business which grossed $100,000 in the previous quarter seeing its sales rise by $25 — reporters at the "essential global news network" were regaling readers with an air of assuredness that the rest of the year would be different. Specifically (both here and here), the wire service carried predictions that the economy would turn in annualized second-quarter growth of 3.5 percent, and that the entire year would end up at 3.0 percent. As seen after the jump, put a big "oops" on those figures (bolds are mine):
US RETAIL SALES RISE A SCANT 0.1 PERCENT IN APRIL
... But the brutal winter depressed the economy during the first quarter, and economic indicators since then have pointed to stronger growth in the current April-June quarter. Many economists are looking for a rebound to an annual growth rate of around 3 percent in the current quarter and similarly solid readings for the rest of the year.
That second-quarter estimate of "around 3 percent" is a half-point below the prediction it was carrying just ten days ago. Additionally, "similarly solid readings" of 3 percent for the third and fourth quarters would lead to full-year growth of less than 2.5 percent (9.1 total points for the whole year divided by 4) — even before considering likely downward revisions to the first quarter which would move it into contraction.
As I noted over a week ago, for the AP's prediction of full-year growth of 3 percent to come true after first and second quarters of 0.1 percent and 3.5 percent, the remaining two quarters would have to come in at almost 4 percent — at which point Janet Yellen would appear to be inclined to raise interest rates to stave off inflation. That it, the 3 percent prediction for the full year was never likely to happen, and it took the AP only ten days to abandon its pretense.
So to summarize, AP has quietly cut its reported annualized growth estimates by 0.5 percent for the second quarter, and by almost a full point in the third and fourth.
Yet feel-good words about the economy permeated the AP report's final paragraph:
The economy's slow but steady improvement has led the Federal Reserve to trim its monthly bond purchases. The Fed is buying $45 billion of bonds each month, down from $85 billion. The purchases were intended to reduce long-term interest rates in order to stimulate borrowing, spending and growth. But with the economy gaining strength, Fed officials believe that type of support is no longer needed.
I hope I'm wrong, but at this rate of "gaining strength," we'll see a reading below 2 percent by the time the first official GDP report for the second quarter comes out in late July — and the AP and others will still probably try to frame the economy's performance President Barack Obama as acceptable.
Exit question: When is someone going to break the ice and acknowledge the possibility that increases in health care costs driven by Obamacare might be crowding out purchases of other items?
Cross-posted at BizzyBlog.com.