First quarter GDP estimate far from desirable

Even if things on the economic front “feel” better, does that mean they actually are better?

Honestly, that question bears repeating and is worth asking in light of today’s first quarter GDP estimate from the United States Department of Commerce.

As defined by Commerce, the GDP, or real gross domestic product, is “the value of the production of goods and services in the United States, adjusted for price changes.” And the first quarter’s advance GDP estimate checked in at 0.2 percent.

Considering that economists maintain the economy needs several quarters of GDP growth of 4 percent or higher for several consecutive quarters, it is clear there is a ways to go to get out of the ongoing pattern of economic stops and starts.

To be sure, there are several factors contributing to this less than impressive estimate. One being another harsh winter to begin the year, which curtailed consumer spending activity to a degree. But at least it was not as dire as a year ago, when Q1 GDP was -2.9.

Commerce said that the low GDP number was impacted by a deceleration in personal consumption expenditures, which is government-speak for consumer spending. And the West Coast port labor dispute, which is hopefully becoming a permanent thing of the past, curtailed real exports of goods and services, which dropped 7.2 percent in the quarter, compared to a fourth quarter gain of 4.5 percent, while real imports of goods and services headed up 1.8 percent in the first quarter, whereas they jumped 10.4 percent in the fourth quarter (and likely was a byproduct of the holidays).

An analysis of the GDP estimate by Doug Handler, Chief US Economist at IHS, observed that “consumer spending fell back to earth in the first quarter,” adding that “lower gasoline prices that fueled fourth quarter growth did not provide any additional growth in the first quarter as prices more or less stabilized.” And he also noted that the high levels of consumer sentiment that added to growth in durable goods in spending in the fourth quarter leveled out in the first quarter.”

This lackluster estimate, which could actually end up coming in lower when the final tally is issued, is discouraging, but at the same time not anything we have not seen before. In other words, there is no need to be panicked. After all, given the topsy turvy economic environment we have lived in for what feels like more than a few years is, and remains, the new normal. We have seen the lows along with a few highs along the way, readjust and get back in the mix. There is no other way to approach it in terms of operating effectively and, on the supply chain side, managing operations.

While GDP and other metrics like retail spending and industrial production are down from desired levels, supply chain activity remains on the busy side for many different reasons, including seasonality, type of industry, demand levels, managing inventory, and being ready for what you may not see coming.

In recent years, we have seen encouraging first halves of the year, which were eventually dimmed by slower second halves. Each year is different in that there are different challenges and opportunities that present themselves. How shippers and carriers react to and handle these things is what makes our business unique. While we may not be entirely sure of what is coming next, we have to be ready to react and respond. Yes, the GDP number is not what we were hoping for, but numbers don’t always tell the entire story either.