GDP Shrinks for First Time Since 2011


GDP Shrinks for First Time Since 2011

The economy shrank in the first quarter of 2014, marking the first contraction since early 2011, according to revised numbers released on May 29 by the Bureau of Economic Analysis. Gross domestic product, the widest measure of economic growth, fell at a 1 percent annual pace.

Deutshce Bank’s Joseph Lavorgna told cnn Money that the slump was due to the abnormally cold and snowy weather earlier this year. According to him, it suppressed sales and thus manufacturing. “The first quarter was disappointing, but rather than view that as an omen of a recession or the first of a down leg in the economy, I see the seeds of a big bounce back in spring,” Hoffman said.

“I don’t believe that for a second,” said Euro Pacific Capital’s Peter Schiff, who instead blames the Federal Reserve’s tapering of money printing, called Quantitative Easing (QE). “You can’t create a recovery based on stimulus, and then take the stimulus away and expect the recovery to continue,” Schiff said. “It can’t continue without the stimulus. It’s like … living off of life support. You pull the plugs, you die. They build an economy, of QE by QE, and you know, it lives by QE, and it dies by QE.”

There have been 12 recessions since World War ii, and the average time between the start of recessions is 5½ years. The last one officially began in 2007, which means we are in overdue territory. The more important question may not be whether we are on the cusp of one now, but how big the next one will be.