There were big headlines–here and elsewhere–after the government reported Jan. 30 that the U.S. economy shrank in the fourth quarter.
Never mind. Just over a week later, surprisingly good trade figures today are leading economists to predict that the government will revise its GDP estimate for the last three months into positive territory.
The Commerce Department said that the trade deficit shrank 21 percent to about $39 billion, the smallest trade gap since January 2010. Oil was the biggest factor. The U.S. imported the fewest barrels of crude oil in almost 16 years, while fuel exports actually rose.
The Commerce Department’s Bureau of Economic Analysis releases its first estimate on quarterly gross domestic product growth just a month after the quarter ends, so it’s forced to make assumptions and extrapolations to fill in for missing data. Its estimate improves as more complete information arrives.
Economists quickly incorporated the new figures into their GDP estimates. Macroeconomic Advisers (briefly) estimated that the economy grew at a 0.7 percent annual rate in the fourth quarter.
“The U.S. trade balance improved dramatically at the end of last year,” Unicredit economist Harm Bandholz wrote to clients.
Wait, though. That wasn’t the end of things. Shortly after putting out better-than-expected trade data, the government released worse-than-expected data on wholesale inventories. Macroeconomic Advisers Ben Herzon said incorporating inventories would probably reduce its growth estimate to roughly 0.4 percent to 0.5 percent. Barclays estimated 0.3 percent. JPMorgan Chase economist Daniel Silver wrote to clients: “Our tracking estimate of 4Q GDP growth is now at 0.2%.”
The net of the flurry of revisions is that the economy probably didn’t really shrink in the fourth quarter after all. On the other hand, it didn’t grow much, either.
