Friday, May 15, 2015

Dark Clouds in the Economy

There was a troubling sign for the economy in figures released yesterday: Retail sales were virtually flat in April, with no growth shown. Households appear to be paying down debt and building up bank accounts rather than making retail purchases. The nation’s personal saving rate in the first quarter of the year was the highest since the end of 2012.


Given that April is the first month of the second quarter, that report had reverberations. J.P. Morgan Chase economists lowered their second-quarter estimate to 2 percent growth from its earlier 2.5 percent after the retail figures were released. Morgan Stanley's second quarter estimate for GDP growth is just 1.5 percent.

Compounding the issue is the fact that first quarter GDP, first estimated at 0.2 percent, is now expected to drop with additional data that has been released. In fact, it seems likely that the economy contracted in the first quarter. The Commerce Department releases its next estimate of first quarter GDP on May 29.

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