26 Jun Economy tanked first three months, but expected to rebound
U.S. economic growth slowed to a snail’s pace through the first three months of the year, based on revised figures released Wednesday by the U.S. Department of Commerce.
But recent trends in Ohio and the region indicate the economy is bouncing back from the slow start, attributed mainly to harsh winter conditions that kept consumers inside and put a lid on spending.
The nation’s gross domestic product — or the value of all goods and services produced in the U.S. — decreased at an annual rate of 2.9 percent in the first quarter this year, down sharply from the previously revised estimate of a 1 percent decline, according to the commerce department’s Bureau of Economic Analysis.
The latest estimate represents the economy’s slowest start in five years. But state and local merchants and business groups dismissed the drag on first-quarter growth as a weather-related anomaly that does not reflect the true strength of the economy, based on the spending patterns they’ve seen.
Spending on consumer goods and services accounts for more than 70 percent of overall economic growth, and the pull back in personal consumption expenditures accounted for more than half of the difference between between the latest GDP estimate and the prior estimate.
But there is little evidence that consumers continued to hold on tight to their purse strings after the winter weather subsided, said Gordon Gough, president and CEO of the Ohio Council of Retail Merchants — a trade group representing retailers throughout the state.
“The harsh weather had a tremendous impact on retail sales in Ohio, but our members are cautiously optimistic,” Gough said. “We think the economy is still growing and will continue to grow through the second half of the year. The stock market is up, home prices continue to increase. All of those factors continue to increase the wealth of the average consumers, and if consumers feel wealthier, they’re more likely to spend.”
Gough noted that unseasonably cold and snowy weather also disrupted sales during the holiday shopping season, but most retailers still met their holiday forecasts, helping the overall economy expand at a 2.6 percent annual rate in the fourth quarter last year, according to government figures.
High gas prices stemming from unrest in the Middle East combined with unseasonably cold and snowy weather, among other factors, translated to less spending in stores and slower economic growth in the first quarter this year.
But the resiliency of consumers can be seen in recent purchases of big ticket items in Ohio, including cars and homes, which ahead or near the same level they were at the same time last year.
Sales of new and used cars in the Dayton area were up 1.8 percent to 31,348 though the first five months of the year, according to numbers provided by Dan Zinni of the Dayton Area Auto Dealers Association.
“That’s big when when you consider that in 2013 we saw a huge jump in sales over the previous year throughout the entire state,” Zinni said. “When you see that sales now are relatively flat or slightly up, I think that’s a very, very positive sign. It means that things aren’t slumping backwards, and we are continuing to go forward.”
Most analysts expect the economy to expand at a healthy rate of about 3 percent in the second half of the year.
And the trend can already be seen in sales of single family homes and condos in the local area.
While the total number of units sold was down about 3 percent through May, compared to the first five months of 2013, the average sales price was up 4.3 percent to $125,336 over the same period, according to figures from the Dayton Area Board of Realtors.
And the $603.5 million in sales transactions so far in 2014 represent a 1 percent increase from 2013, said Bob Jones, a spokesman for the Realtors board.