U.S. Probably Not Headed Toward Another Recession

Although just two back-to-back GDP contractions constitute a recession, chances of another this time are slim. 

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The U.S. economy contracted at a 2.9 percent annualized rate in the first three months of 2014, and that was the lowest it’s been since the first quarter of 2009, during the depths of the financial crisis. Given signs of hope in other economic data, such as a fall in jobless claims, the gross domestic product decline likely isn’t indicative of a longer-term trend to be worried about.

A recession is defined as a GDP reading that is negative for two or more consecutive quarters, such as was the case during the downturn that officially ended in June 2009. Economists like Eric Green of TD Securities in New York see Wednesday’s reading as an anomaly, and that chances of a second quarter negative GDP reading are “exceptionally low.”

[READ: GDP Contraction, Steepest in Five Years, Probably Not Reason to Panic]

The second quarter will bring growth in a number of areas lacking in the first quarter, including “better consumer spending, better state and local spending, better inventory accumulation,” Green says.

“With the big blowout of net exports already in place, the chances of us going negative again would be 5 percent, if that. In fact quite the contrary, I think it’s going to be a strong number,” he adds.

The weak number released by the Commerce Department Wednesday reflected, among other factors, weaker health care spending and personal consumption expenditures and a widened trade gap during an unusually cold first three months of 2014.

The chart below shows quarterly U.S. GDP growth dating back to 2006, before the housing crisis.