You've got to hand it to Martin Crutsinger at the Associated Press. His Thursday writeup on May's disappointing retail sales result — a 0.3 percent increase compared to expectations of 0.4 percent to 0.6 percent — was infused with optimism. It's "unlikely to derail overall economic growth." There's been a "revival in consumer spending." We'll see "boosting incomes and supporting stronger consumer spending" as a result of more hiring."
But along the way, Crutsinger quietly downgraded his estimate of second-quarter and full-year economic growth. Just a few weeks ago, AP reports were predicting that the second quarter might come in at an annualized 4 percent, and that 2014 on the whole would surely come in at 3 percent or greater, even after the first quarter's annualized 1.0 percent contraction. Let's see how Crutsinger stealthily reported a far lower estimate after the jump (bolds and numbered tags are mine):
US RETAIL SALES ROSE 0.3 PERCENT IN MAY
U.S. retail sales rose modestly in May as consumers turned cautious in their spending. But the weaker-than-expected result is unlikely to derail overall economic growth in the second quarter.
Retail sales rose 0.3 percent in May, helped by a jump in demand for autos, the Commerce Department said Thursday. The result follows a 0.5 percent climb in April, which was revised up from an initial estimate of 0.1 percent. March sales surged 1.5 percent - the biggest one-month gain in four years.
Analysts said any disappointment in May was offset by the change in April's figure. [1]
"May retail sales fell short of estimates, although upward revisions to April make it about a wash versus consensus forecasts," said Jay Feldman, director of U.S. Economics Research at Credit Suisse.
Retail sales had fallen sharply in January as winter storms cut into shopping and various other types of economic activity. Economic growth went into reverse in the first quarter, shrinking at an annual rate of 1 percent. [2] But the revival in consumer spending has led economists to predict a solid rebound to 3 percent growth or better in the current April-June quarter. [3]
Paul Dales, senior U.S. economist at Capital Economics, said that the declines at department stores and appliance stores were hard to understand, given the rapid rise in employment. Households are also feeling wealthier with the strong gains in the stock market and in home prices. [4]
... Many economists are forecasting that overall economic growth will remain at a solid 3 percent level in the second half of the year. [5]
Notes:
[1] — With a disappointing May, an upwardly revised April result beats the alternative. But the trend is going the wrong way, from March's winter-recovering 1.5 percent to April's 0.5 percent to May's 0.3 percent. June will likely need to come in higher than May for consumption expenditures to do their part in contributing to the second quarter's gross domestic product growth. That seems far from certain.
[2] — What a ridiculous word game this is. Growth does't "go in reverse." It ends. When it goes negatvie, it's called a "contraction."
[3] — As noted in this May 31 NewsBusters post, Crutsinger told us two weeks ago that "Some analysts say GDP growth could hit an annual rate of 4 percent in the second quarter." Now we're down to "(an annual rate of) 3 percent growth or better." That's a big drop in less than two weeks.
[4] — The problem, and Crutsinger should know this, is that "the strong gains in the stock market and in home prices" and their related wealth effects are not broad-based, but are concentrated in the upper-end of the housing market and among those who already have high net worths, respectively. (Yes, the irony that this is occurring in a presidency obsessed with "income inequality" and "spread(ing) the wealth around" is thick.) The influence of these factors on overall economic growth is likely to be quite limited. If everyday consumers continue to spend more, it will likely because they put themselves further into debt in the process.
[5] — Less than two weeks ago, Crutsinger wrote that growth should "top (an annualized) 3 percent in the second half of this year." Now we're down to "a solid 3 percent level" ("Solid"? When did AP ever call 3 percent growth "solid" during the Bush 43 year? Answer: Never, or almost never. Other AP reports in the past year have also described 3 percent growth as "robust.")
Take all of Crutsinger's growth assertions, together, and you end with projected full-year economic growth coming in far lower than 3 percent:
- First quarter: -1.0 percent.
- Second quarter (generously interpreting "3 percent growth or better"): 3.3 percent.
- Third quarter: 3 percent.
- Fourth quarter: 3 percent.
Add all of those quarters up (total: 8.3), divide by 4 (result: 2.075), and round up a bit, and you get completely unimpressive full-year growth of 2.1 percent — a figure Martin Crutsinger "somehow" and conveniently failed to specifically disclose.
That's a pretty hard fall from the assurances of 3 percent full-year growth with which AP and most of the rest of the business press regaled us a very short time ago.
Cross-posted at BizzyBlog.com.
