The mixed results of the U.S. economy continue to amaze economists, including Alan Tonelson.
In a recent research note, Tonelson said the recent estimate of first-quarter U.S. GDP growth — which came in at 1.1 percent — was “was one of the most peculiar reports in this series I can remember.”
That’s a pretty big statement coming from Tonelson, whose experience includes almost 20 years as a researcher with the U.S. Business and Industry Council. Tonelson tracks the manufacturing market, including plastics. He's the founder of the RealityChek blog, which focuses on manufacturing, the broader economy and trade.
The 1.1 percent growth number “is a marked slowdown from the fourth quarter’s 2.55 percent real annualized growth,” Tonelson said in the note. “So not great economic news.”
On the other hand, price-adjusted GDP still grew, he added, and the price-adjusted total trade deficit slipped for the third straight time while the economy expanded. “That kind of streak hasn’t been seen since the period between the first and fourth quarters of 2007 — just before the arrival of the Great Recession,” Tonelson said.
“Despite that reference, that’s encouraging economic news, since it indicates that growth … remained healthy quality-wise. In other words, it stemmed more from producing than from spending — the opposite result from the typical consumption-led growth pattern usually signaled by a widening rising trade gap.”
Total exports from the U.S. climbed in the first quarter by almost 1.2 percent to a new record of just over $2.6 trillion. That’s good news for U.S. polyethylene resin makers, who need to export as much as they can to find a home for shale-fueled capacity added in the last decade.
Looking ahead, Tonelson said that the current slowdown “could well stabilize and even reverse itself if the central bank pauses or ends its credit tightening for fear of bringing on a hard landing, and if politicians succumb to election-year temptations to keep voters happy with added government spending.”