Back in September, the CBO made a forecast of the likely effect of Hurricanes Katrina and Rita on economic growth for the remainder of 2005. In my post on the subject, I noted that the bottom line prediction was about a percentage point off annualized growth in the third and fourth quarters. It didn't seem like we saw too much of that in the third quarter, and that wasn't surprising, given how late in the quarter the hurricanes hit.
Today, the BEA released its advance estimate of GDP growth in the fourth quarter. It comes in at a lackluster 1.1 percent, well below the forecasts of about 3-3.5 percent. I wonder--and at this point, it is only wonder--if the CBO got its forecast about right and we now see most of the impact in this fourth quarter number. That provides no explanation of why the forecasters were off, but it does suggest that we should have been expecting slow growth. The composition of the decline--a big slowdown in personal consumption expenditures--fits with this story.
If it was the hurricanes, we expect a rebound. If it was not the hurricanes, we don't. Read more on the latter over at Angry Bear.