FORTUNE — The Commerce Department revised its estimate for real GDP growth in the first quarter of 2014, saying that it fell by 1%, revising downward its previous estimate that real GDP declined by 0.1% last quarter.
Economists had blamed much of the decline in GDP on the effects of unusually severe winter weather in much of the country, which can cause consumers and businesses to delay purchases they otherwise would have made. But the data in today’s report show that consumer spending was actually strong in the first quarter of the year, increasing by 3.1%. What really dragged down growth was shrinking business inventory and a lack of investment on the part of private firms — with both categories shrinking by roughly 1.6%. Exports also fell by 6% after increasing by 9.5% in the fourth quarter of last year.
The release sparks fresh debate over the state of the U.S. economy. Bears are pointing to the lack of business investment and what appears to be the slowing of the U.S. housing recovery as reasons to doubt the common wisdom that the economy is slowly, but surely, getting back to full strength. Some on Wall Street are even labeling this the beginning of another recession:
But many others caution that quarterly economic data can be very volatile and there’s still plenty of evidence of a strengthening economy. Jim O’Sullivan, chief U.S. economist at High Frequency Economics has been cautioning market participants to not draw too much from quarterly GDP data, writing in a note to clients this week that jobs numbers, particularly the weekly unemployment claims data, has consistently shown signs of an improving economy.
O’Sullivan says that weakening data on business investment (or capex) does not jive with the fact that businesses appear to be steadily hiring more people. He writes:
The continued strength in employment has encouraged us to discount much of the recent weakening in capex … as volatility rather than sudden weakening in the trend. Along with weather effects, the expiration of bonus depreciation allowances may have played a role in the fall-off in capex at the start of 2014 … more broadly the case for a pick-up in capex looks compelling: Cash flow is high relative to investment and still growing; business confidence has been rising … and slack levels have declined significantly.
It’s also worth noting that quarterly GDP data has been pretty volatile since the recovery began. Growth in the fourth quarter of 2012 was nearly negative before bouncing back strongly in 2013, with the second half of last year showing the best six-month period of growth since the end of the recession.