July 31, 2008

2nd Quarter 2008 GDP — Up an Annualized 1.9% (Update: 4Q07 Was Negative; I Blame Pelosi-Reid :–>)

Filed under: Economy,Taxes & Government — Tom @ 8:42 am

The post on troop deaths in Iraq during July took longer than expected, so the runup will be rushed:

  • Consensus from the AP’s Joe Bel Bruno, as reported on Monday, was that 2nd quarter GDP growth will come in at an annualized 2.4%.
  • The Wall Street Journal’s Mark Gongloff reports a consensus of 2.3% this morning, and also notes that revisions to prior years are going to be reported today. Those also bear watching.
  • Expert economic analyst and Democratic presidential candidate Barack Obama is presumably expecting a negative number, based on his comment a couple of weeks ago that there is “little doubt we’ve moved into recession.”

The envelope, please, from the Bureau of Economic Analysis:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.9 percent in the second quarter of 2008 (that is, from the first quarter to the second quarter), according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.9 percent.

The Bureau emphasized that the second-quarter “advance” estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The second-quarter “preliminary” estimates, based on more comprehensive data, will be released on August 28, 2008.

There will also be a final report near the end of September.

So it turns out that those who were calling for 1.5% – 2.0% before the end of June were closer to the mark than those who revised their estimates upward during July. Unless the next two revisions go way up (initial reax: doubtful), Brian Wesbury, who predicted 3.0% last week, overshot the mark by quite a bit for the second quarter in a row.

I think Wesbury and others who got overoptimistic (including moi) didn’t take the ISM Non Manufacturing Index’s June move into contraction seriously enough.

Further thoughts may or may not get noted after a further look and a review of the prior-year comprehensive revision.

Regardless, though it’s by no means acceptable, it’s miles away from Barack Obama’s “little doubt we’ve moved into recession.” He should acknowledge he was wrong. Don’t bet on it.

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UPDATE: Well, well. The press has its red meat, six months late (but they should be careful what they wish for — See Update 2).

BEA revised the fourth quarter of 2008 down to -0.2% from +0.6%, breaking the 24-quarter string of unbroken growth that began in the fourth quarter of 2001. Not that anyone in the press will pay attention, but that is the fourth-longest positive string on record (the others are 1Q-1961 to 1Q-1967, 25 quarters; 4Q-1982 to 2Q-1990, 31 quarters; 2Q-1991 to 2Q-2000, 37 quarters).

At the same time, it revised the 2nd quarter of 2007 up from +3.8% to +4.8%. So this is how the past seven quarters look now:

4Q 2006, +1.5%
1Q 2007, +0.1%
2Q 2007, +4.8%
3Q 2007, +4.8%
4Q 2007, -0.2%
1Q 2008, +0.9%
2Q 2008, +1.9%

I know the results are what they are, but seriously, does anyone remember the middle quarters of 2007 being that great (I mean, literally on fire) in comparison to the quarter that preceded it, or the two that followed?

UPDATE 2: Far be it from me to make any kind of political point (/sarc). But since the numbers are sitting there like a bunch of hanging curveballs screaming “Hit me! Hit Me!,” here goes:

  • The Republican-controlled 109th Congress’s last budget, and therefore its partial accountability for the performance of the economy, ended on September 30, 2007, the fiscal year-end of the last budget it passed. Economic growth during their last four quarters of their partial accountability was 2.8%.
  • The Democrat-controlled 110th Congress’s official budget and economy responsibility, and therefore its partial accountability for the performance of the economy, began on October 1, 2007, the effective date of the first budget it passed. That would be the first day of the fourth quarter of 2007 — the quarter that broke the 24-month 24-quarter positive streak. Annualized economic growth during the past three quarters has been less than 1%.

Given that the president has been the same person throughout the entire period, it can’t be a coincidence.

Why shouldn’t I blame Pelosi and Reid?

Just, well, y’know, puttin’ it out there. :–>
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UPDATE 3: All politicizing aside, there’s no guarantee that future GDP comprehensive revisions, of which there will be at least two more, won’t pull 4Q-2007 back into positive territory — or make 1Q07 negative. All other quarters back to early 2005 appear to be safe from going negative.

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2 Comments

  1. Of course to Aversa the end of the world is well almost nigh: http://news.yahoo.com/s/ap/20080731/ap_on_bi_go_ec_fi/economy

    Comment by dscott — July 31, 2008 @ 11:46 am

  2. These numbers make sense. Businesses and consumers were squeezing every last advantage out of 2Q and 3Q ’07 before the Democrat Effect took hold.

    Comment by Joe C. — July 31, 2008 @ 2:05 pm

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