June 11, 2015
Economic reporting is far too focused on short-term fluctuations that often have little relationship to the underlying trend growth in the economy. Last fall this focus led to many celebrations of a turn around in the economy with many pronouncements that the United States was back on top in terms of growth.
The celebrations quickly turned to despair as bad winter weather led to a drop in GDP in the first quarter. There was much hand-wringing over why consumers were not spending their dividend from lower gas prices. (Somehow the hand-wringers never bothered to notice that consumption was at a near record high as a share of the GDP.)
This hand-wringing hit its peak earlier this month with this “letter to stingy American consumers” in the Wall Street Journal. In the letter the WSJ begged consumers to start spending again. Apparently they got the message retroactively. The Commerce Department reported today that retail sales jumped 1.2 percent in May, with April’s data revised up from no change to an increase of 0.2 percent.
So it looks like consumers are again spending their cheap-gas dividend and the economy is safely back on its slow growth track. Needless to say, we will probably have another round of celebrations as people look at the strong growth in May and tout a new boom, forgetting that the cause is a bounceback from the winter weakness. At least it gives economists and economics reporters something to do.
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