Recent Expansion Weaker than Previously Thought

From 2012 through 2014, the economy grew 2 percent annually, according to three years of revised figures from the U.S. Commerce Department. That’s a 0.3 percentage point downgrade from prior estimates.

Since the recession ended in June 2009, the economy has advanced at a 2.2 percent annual pace through the end of last year. That’s more than a half-percentage point worse than the next-weakest expansion of the past 70 years, the one from 2001 through 2007. While there have been highs and lows in individual quarters, overall the economy has failed to break out of its roughly 2 percent pattern for six years.

The output reading for the first quarter of last year was recast to a 0.9 percent contraction instead of a 2.1 percent annualized drop. The prior figure represented the worst contraction on record outside of a recession. The new number isn’t even the worst quarterly contraction of the expansion. GDP declined at a 1.5 percent annual pace in the first quarter of 2011.

The upward revision to the first quarter of 2014 was largely due to revised data on construction spending, specifically on power structures. The revision reflected both new seasonal adjustments and newly available data.

The most significant change in the latest data set is seasonally adjusting military spending. Those outlays tend to be the strongest in the third quarter of the year, just before the government’s fiscal year ends. Smoothing out that seasonal change was a major factor in GDP for the third quarter of 2012 being downgraded to a 0.5 percent advance from a 2.5 percent increase, and the third quarter of 2013 being recast to a 3 percent gain from a 4.5 percent increase.

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