Economists have found themselves repeatedly making excuses. First it was the snowstorms. Then it was Japan’s earthquake, tsunami and nuclear disaster which crimped the supply of parts to car assembly plants in America. Then, as the snow melted, floods ravaged Arkansas, Mississippi, Missouri and Tennessee, and tornadoes battered Alabama and Missouri. America has suffered five incidents of extreme weather this year, each inflicting at least $1 billion in damage.
The most important special factor has been petrol. Prices jumped from $3 per gallon at the end of December to $3.90 in early May. That has siphoned off much of the purchasing power that consumers should have extracted from December’s tax agreement and subsequent gains in employment. Total consumer spending rose at just a 6.7% annual rate in the three months to the end of April, but most of that increase was eaten up by inflation. Real spending grew by a paltry 2.2%.
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The Economist–A Litany of special factors exposes the recovery’s fragility
Economists have found themselves repeatedly making excuses. First it was the snowstorms. Then it was Japan’s earthquake, tsunami and nuclear disaster which crimped the supply of parts to car assembly plants in America. Then, as the snow melted, floods ravaged Arkansas, Mississippi, Missouri and Tennessee, and tornadoes battered Alabama and Missouri. America has suffered five incidents of extreme weather this year, each inflicting at least $1 billion in damage.
The most important special factor has been petrol. Prices jumped from $3 per gallon at the end of December to $3.90 in early May. That has siphoned off much of the purchasing power that consumers should have extracted from December’s tax agreement and subsequent gains in employment. Total consumer spending rose at just a 6.7% annual rate in the three months to the end of April, but most of that increase was eaten up by inflation. Real spending grew by a paltry 2.2%.
Read it all.