Yesterday’s Commerce Department announcement of a steep decline in first quarter GDP was met by a huge yawn by the business and investing community. That’s good news considering that GDP fell 2.9% in the first quarter, an enormous decline that outstripped any estimate of the decline. The collective shoulder shrug was because the decline was expected and even though it was forecasted to be worse, most economists knew that they didn’t have a good way to estimate the true impact of the polar vortex winter. For those wondering why the government’s estimates of first quarter GDP were so much higher in April and May, the answer is that Commerce takes in more information with each month and adjusts the estimates appropriately. As usual, some of the most important data just isn’t available until almost three months pass.

OK, here’s why the drop is no big deal. Cold weather kept shoppers, home buyers, contractors, etc. home instead of out doing what they do. Frigid temperatures kept freight from moving many days this winter. The normal measures of output are inventory building, consumption and foreign trade. None of these could function properly in January and February but the upside is that most activity gets deferred in those kinds of winters. Dining out, movie-going and seasonal activity won’t be made up but most consumption that would have occurred will happen later – or has already.

The bad news in the report was called out but seems to have been obscured by the yawn. The biggest output revision done in June was for healthcare spending, which could have been affected somewhat by the weather but is more likely to have been a reflection of the new normal post-Affordable Care Act.

When I researched the healthcare edition of BreakingGround, I was surprised to hear from so many sources that visits were down – in some cases more than 30%. People who found out this year that the MRI or follow up visit with the specialist was going to cost them much more money decided not to go. Emergency rooms, which saw a big increase in co-pay charges, have seen big declines in visits. Not every place is experiencing this phenomenon but most are and in a city with more than its share of older people on fixed incomes, this trend is more noticeable.

Economists expect that the spring rebound is real and that second quarter GDP will be up well over 3%. That’s good. Watch the healthcare spending line item when these reports come out. That winter drop is a trend worth following. In a town where hospital construction makes up one of the highest portions of the construction industry, declining visits will keep capital spending down too.

Not much on the project news front. Mosites and Carl Walker put revised BAFO pricing in Tuesday on the former Saks site project. Carl Walker’s previous bid was reportedly the low proposal.

Wednesday’s deal to re-open the government and raise the debt ceiling provided some needed relief to investors but the end result (and the shutdown itself) produced more yawns than anything else.

First some thoughts on the shutdown: the 16-day furlough saved the government little money (workers will be paid retroactively) but did cost lots in lost revenues. It will also probably shave about half percent from the fourth quarter GDP – a number that is already expected to be low. Some of that will bounce back in early 2014 but some is just output lost. In the end the high cards were in the president’s and Democrats’ hands. There was no movement on Obamacare or the budget. Very little of substance was done except to kick the problem down the road three months. Congress won’t get a raise. The sequestration cuts remain in place.

The sad part is that the shutdown refreshed the memories of business people that our government is bleeding money and doing nothing to stop it. The big casualty of the shutdown is that uncertainty came back into the picture. With most major projects running into budget problems (Chevron, Industrial Scientific, etc.), the last thing we needed was uncertainty about the economy going forward.

On the bright side, there are some projects moving ahead. Bakery Village Apartments are blowing and going and there are reports that the office buildings that are part of Bakery Square 2.0 are attracting hot interest and may start sooner in 2014. Prominent Fluid Controls selected BRIDGES to do its 21,000 sq. ft. expansion in RIDC Park. PJ Dick should be starting Seton Hill’s $14 million Natural Health Sciences building.

Washington Co. Chamber of Commerce threw a party to celebrate the erection of the two buildings at Zenith Ridge in Southpointe II, which is the Ansys campus that Burns & Scalo is developing as partner in Quattro LLC. Design builder Clayco Construction has cast five-story exterior walls on site – with brick embedded in the pour – and lifted them in a matter of a few weeks. The steel floor joists are following rapidly on the first building already. An aerial photo of the progress is below.

 

 

 

 

 

 

At the party, Jim Scalo mentioned that his company was ready to build a spec office he calls the Conchord near the airport in the RIDC West property. As planned originally, the one-story building will be 60,000 sq. ft.