There’s been much gnashing of teeth in the past few weeks regarding the health of the US economy. The government’s initial estimate GDP growth in the first quarter looked weak on the surface, and private forecasters now expect downward revisions based on unfavourable changes to the trade balance. But, as we noted a few weeks ago, quarterly data are noisy, while the underlying trends are broadly positive.
So it was interesting to read a new note from economists at Barclays (h/t George Pearkes) suggesting that most of the disappointment in the first quarter’s data can be explained by a statistical artifact that disproportionately affects the figures for non-oil construction, exports, and defence procurement. Ever since the start of 2010, spending in these categories has consistently collapsed in the first three months of the year only to rebound in the subsequent nine months. The difference in average annualised growth rates is a whopping 20 percentage points. Read more