The Wall Street Journal’s bottom line: “The Worst Expansion Since World War II Was Even Weaker”
Note: This post originally appeared at 1:30 a.m., and was revised to have an 8:30 post time when the GDP report is released.
So here we are — after another winter of contraction (two in a row, and the three of the past five), about to get the first take on second-quarter GDP, the report everyone watching the economy has been waiting for.
We’ll learn what the government thinks second-quarter growth was, and we’ll see what it did to preceding quarters and years (2012-2014 and 1Q15 for sure, and possibly further back, based on my understanding of the guidance).
The government’s “Preview of the 2015 Annual Revision of the National Income and Product Accounts” (full PDF here) is going to include the following, in the their words:
- An improved treatment of federal refundable tax credits in the personal income and outlays account and the government receipts and expenditures account.
- Two new aggregates—the average of gross domestic product (GDP) and gross domestic income (GDI) and final sales to private domestic purchasers—that will facilitate the analysis of macroeconomic trends.
- Improvements to the seasonal adjustment of GDP components, including federal defense spending on services, and of the source data underlying several other NIPA components.
- An expanded presentation of payments and receipts of transfers and taxes between the United States and the “rest of world” that will harmonize the NIPA presentation of these transactions with the presentation in BEA’s international transactions accounts (ITAs).
- An improved presentation of exports and imports that provides detail on exports of petroleum and products that will align the NIPA presentation of trade in industrial supplies and materials with the presentation in the ITAs.
These are not all benigh changes. The third item in particular is going to give a nod to the mostly nonsensical “residual seasonality” ideas first conveniently raised by lefty Steve Liesman in April. If we see first quarters of previous years showing significant improvement over what was previously reported, it will in my opinion show that the government gave in to the pressure to fiddle, delivering yet another blow to its credibility.
On the other hand, it does appear that the Bureau of Economic Analysis intends to (eventually) release not seasonally adjusted data which can be compared to the seasonally adjusted results and, eventually, the raw data of previous years. That’s a significant transparency improvement — if it indeed comes to pass.
Now as to today’s 2Q15 report, here are various second-quarter predictions, all of which may prove wildly wrong thanks to the multiyear revision:
- Federal Reserve Atlanta — annualized 2.4 percent
- Moody’s — 3.2 percent
- Associated Press — 2.5 percent to 2.7 percent, depending on which economics writer authored related pieces during the past week.
- Briefing.com (per Yahoo’s Economic Calendar) — 1.3 percent
- “Market” (per Yahoo) — 2.5 percent
I remain stunned that the growth estimates remain so positive, given that so many indicators in manufacturing, wholesale and retail are trailing levels seen a year ago. I’m not aware of any precedent for such a disconnect between production- and sales-based data compared to consumption-based data. It’s very hard to imagine how there can be such a big difference between the two without one of them being very wrong.
Thurs, I have to believe that if there’s a surprise in the works, it will be seriously to the downside. But the default is that it’s Keynesian consumption uber alles as far as reported GDP is concerned, so we’ll probably march along at 2 percent or so, which will be enough for the administration to say things are okay enough, but also mediocre anough to keep the Fed from increasing interest rates for a while.
Meanwhile, the underlying economy out here in Realville continues to stink.
We’ll see here at 8:30. The currently empty tables seen below will get filled in as quickly as possible after that occurs.
HERE IT IS (full text version): Well, they got their first quarter back into positive territory —
Real gross domestic product — the value of the production of goods and services in the United States, adjusted for price changes — increased at an annual rate of 2.3 percent in the second quarter of 2015, according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.6 percent (revised).
… The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures (PCE), exports, state and local government spending, and residential fixed investment that were partly offset by negative contributions from federal government spending, private inventory investment, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
… The acceleration in real GDP growth in the second quarter reflected an upturn in exports, an acceleration in PCE, a deceleration in imports, and an upturn in state and local government spending that were partly offset by downturns in private inventory investment, in nonresidential fixed investment, and in federal government spending and a deceleration in residential fixed investment.
Here are the changes to the quarters and full years (2009 through 2011 were unchanged):
Sticking out like a sore thumb is the 2-point knockdown of 3Q12 to 0.5 percent instead of 2.5 percent. That was the preelection GDP report, which came in at 2.0 percent when originally reported on October 26, 2012. How flipping convenient.