The 2020 Mid-Year Economic Update_long

Economy Sputtering to Start 2015

Poor performance blamed on bad weather for second straight year.

The U.S. economy is off to a slow start in 2015 for the same reason it struggled out of the gate a year ago – cold and snowy weather across the country, especially in the Northeast.

2014 began with similarly adverse conditions, as the economy declined 2.1 percent for the period, the largest drop-off since the end of the Great Recession. But the nation's fortunes rebounded during second and third quarter last year with growth of 4.6 and 4.9 percent, respectively.

All indications point to another slow start for this year's first quarter – existing and new home sales, the consumer price index, GDP and consumer sentiment are all below their forecasts for the quarter – but whether or not 2015 can rebound remains to be seen.

The Chicago Fed National Activity Index edged lower to -0.11 in February from -0.10 in January. Two of the four broad categories of indicators that make up the index decreased from January, and two of the four categories made negative contributions to the index in February.

And the most recent data on the manufacturing sector show it ended 2014 on a downswing. U.S. manufacturing companies' seasonally adjusted after-tax profits in the fourth quarter were $154.1 billion, down 2.8 percent from 4Q 2013 and down 6.5 percent from the previous quarter, according to the U.S. Census Bureau. Their seasonally adjusted sales for 4Q totaled $1.73 trillion, up 0.9 percent from $1.71 trillion in 4Q 2013 but down 1.6 percent from the previous quarter.

And 4Q unadjusted after-tax profits for wholesale trade corporations with assets of $50 million and over totaled $7.8 billion, down 17.9 percent from the after-tax profits of $9.5 billion in the fourth quarter of 2013, and down 44.3 percent from the after-tax profits of $14 billion the previous quarter.

Unadjusted sales for the fourth quarter of 2014 totaled $652.2 billion, up 7.1 percent from fourth quarter 2013, and up 3.3 percent from the previous quarter.

However, the national reports belie the March ISA Economic Indicator Report from the Industrial Supply Association, which indicated accelerating growth in February for both manufacturers and distributors.

"The ISA Manufacturer Index increased from 58.9 in January to 62.5 in February, while the ISA Distributor Index rose from 57.8 in January to 63.4," said Bryon Shafer, general manager of ASG Industrial and chairman of ISA’s strategic information committee, who called the results "good news." “The year has started out with positive results and members for the most part are optimistic about the coming months."

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