By Mark Bern, CPA CFA
Economists predicting U.S. GDP growth above 3.5 percent in the second quarter are abundant across the country. The argument is that much pent up demand was created by the cold weather in the first quarter that kept consumers inside and away from shopping. The problem is that consumer spending was not the problem; it came in at a very respectable 3.1 percent (after the first revision). But, then again, much of that increase was from increases in healthcare spending, primarily on higher insurance premiums. It counts, but does not really help the economy. Increased spending on healthcare may mean that there is less left to spend on discretionary items. Thus, there may not be as much pent up demand as expected. So, what are economists around the country predicting for this quarter?
According to this article from Bloomberg, Morgan Stanley predicts that the second quarter GDP growth will be 4.2 percent. Here is a quote from another article with high expectations from USA Today: "Jim O'Sullivan, chief U.S. economist of High Frequency Economics, predicts economic growth will run at a 4% annual pace in the current quarter as businesses and consumers make up for reduced spending early this year. Many economists expect growth to exceed 3% the rest of this year and in 2015."
The NYTimes.com site lists other articles on the subject citing in one that the U.S. Commerce Department is forecasting 3.6 percent growth in the second quarter. It almost seems as though private sector economists are trying to tell us that the federal government is sand bagging here, playing down expectations to get a surprise on the upside. That would be almost refreshing.
Now, I want to take a look at some early indicators to see how great the economy is doing so
