Blame snow for the drop in GDP

“Sweater Weather.”

The title of that pop hit by the Neighbourhood might be an appropriate explanation for why the U.S. economy is slowing.

The Commerce Department revised its estimate of annual economic growth — the gross domestic product — from 3.2 percent to 2.4 percent. And some economists think the bad winter weather is partly to blame.

The consumer component of the GDP showed an increase of 2.6 percent, down from the original 3.3 percent, after reports of weak holiday sales. Many retailers blamed the weather for keeping shoppers away.

But Michael Dolega, senior economist at TD Economics, believes a 2.6 percent rise is still pretty good.

“The gain in consumption is the best in seven quarters,” he noted.  “I’d be happy if we stayed at this level.”

Dolega thinks the effect of the cold and snow will be more pronounced this year.

“Consumption will likely remain somewhat constrained during the first quarter of 2014, given the abnormally severe and disruptive weather in January and February,” he said.

Fed Chair Janet Yellen raised similar concerns in her semiannual report to the Senate on Thursday.

“It’s really quite a range of data that has been soft recently,” she said. “I think it’s clear that … unseasonably cold weather has played some role in much of that. But at this point it is difficult to discern exactly how much.” 

Beyond the weather, there are some signs in the fourth-quarter report that are raising larger concerns.

Exports fell from 11.4 percent to 9.4 percent. And business inventories added just 0.14 percentage points to the GDP number. The first estimate had that at 0.42 percentage points.

A big drop in government spending, which sank 12.8 percent, also added to the slowdown.

“It does suggest warnings that growth would be slowed by the federal government sequester and the two-week government shutdown in October were not misplaced,” said Mark Lieberman, managing director and senior economist at Economics Analytics Research.

But Doug Handler, chief economist at IHS Global Insight, sees a silver lining in the data.

“If anything, they provide information to justify a small upward change to the first quarter real GDP forecast,” he said.

Handler said he still expects the economy to expand at a 2.7 percent clip in 2014, with faster growth in the second half of the year.