Real gross domestic product (GDP) edged down 0.1% in the first quarter of 2008, its first quarterly decline since the second quarter of 2003. The economy, which had started to lose momentum in the second half of 2007 as exports declined, stalled in the first quarter due to widespread cutbacks in manufacturing, most notably in motor vehicles. In addition, weather disruptions hampered economic activity in the quarter. Economic output contracted 0.2% in March. Final domestic demand advanced 0.6% in the quarter on the strength of consumer spending. Inventory accumulation eased considerably in the first quarter, after two quarters of large build-ups.
The release makes note of three things that appear to be one-off events: bad weather (it was a brutal winter), an auto parts strike, and a rundown in inventories. And since exports have been flat throughout this cycle, I'm not getting too exercised by the slowdown in exports. So there's reason to hope that these last two quarters are an inflection point, and that growth will resume - especially if the US manages to avoid a recession.
But the thing that makes me a bit nervous is the slowdown in domestic demand, since that's what has been driving this expansion:
Employment and real wage growth have been holding up pretty well over the past few months, so maybe this is just another one-off blip.
At what point does a sequence of unrelated one-time events become a trend?
Update: I just came across this passage from the Globe and Mail story:
Analysts in Canada have recently focused less on real GDP and more on nominal GDP, which doesn't adjust for rising prices. That's because even while economic output stagnates, much of Canada's prosperity is coming from the money earned from rising commodity prices. Nominal GDP rose 4.6 per cent at annualized rates in the first quarter, and personal disposable income also surged.Huh? If someone can extract meaning from this, please explain it to me in the comments.