Good News and Bad News in Today's 2.5% GDP Number

     In early April Sumner said that while it often seems that he makes unfalsifiable predictions, we can absolutely hold him to one prediction: if NGDP is below 4% for the year or RGDP is below 2% then the Fed didn't wholly offset the fiscal austerity of the sequester, etc. as the Sumner Critique predicts.

     "Just so that you don’t think I always cop out on past predictions, post this one on your wall:

If NGDP growth during 2013 is less than 4%, or if RGDP growth is less than 2%, then I believe fiscal austerity will have reduced growth somewhat.  In other words, I believe the Fed will have failed to offset the expected fiscal austerity with its QE3 policy of late 2013.

      "Hold me to it."

   http://diaryofarepublicanhater.blogspot.com/2013/04/sumners-mea-culpa-and-whats-to-blame.html

       What does today's GDP number suggest in this regard? The good news is that the economy returned to stronger growth after a small contraction in the 4th quarter. However, the 2.5% headline number is still lower than expectations: the consensus was a 3.2% number. 

        "The U.S. economy expanded in the first quarter but failed to gather as much steam as expected, raising concerns of another year of sluggish growth."

     "Consumer spending advanced during the first quarter despite tax increases, but those gains were held in check by slowing business investment and government cutbacks."

     "The nation's gross domestic product, a measure of all goods and services produced in the economy, advanced at a 2.5% annual rate between January and March, the Commerce Department said Friday. Economists had forecast a 3.2% expansion.

     "The economy continues at a brisk walk at best—it has yet to start running," said economist Joel Naroff, of Naroff Economic Advisors."

     http://online.wsj.com/article/SB10001424127887323789704578446513668963282.html?mod=WSJ_hpp_LEFTTopStories

     We're also still in the early effects of the sequester which are still primed to take a bite-even if Congress doesn't have to worry over flight delays. Cantor sees this sate of affairs a Republican victory of epic proportions. 

     http://tpmdc.talkingpointsmemo.com/2013/04/cantor-memo-faa-vote-democrats-caved.php?ref=fpa

     While forecasters predicted 3.2% in the 1st quarter, the full year forecast was considerably lower, so with that in mind, we still may be behind schedule for Sumner's 2% RGDP number. So time will tell how we do this year but it's hard to see how Cantor can see any reason for the American people to celebrate.