July 30, 2010

2Q10 GDP Growth: An Annualized +2.4% (Updates: Looking at the Comprehensive Revision and the Current Quarter)

Filed under: Economy,Taxes & Government — Tom @ 8:51 am

The BEA report (full text with tables) is here.

The result is pretty much in line with predictions, as noted in this post yesterday, where the consensus forecast was 2.5%. I saw another consensus prediction from Bloomberg that it would be 2.6%.

UPDATE: First, let’s deal with the comprehensive revision to prior quarters going back to mid-2007 (BEA actually went back to the beginning of 2007).

Here are the new figures:

RevisedGDP2Q07to2Q10

Initial observations:

  • The recession as normal people define it still ran from the third quarter of 2008 through the second quarter of 2009.
  • That recession, which was caused by the creators of the POR (Pelosi-Obama-Reid) economy, was even more severe than originally thought. This is the second serious downward revision to 3Q08, which was originally thought to have been an annualized -0.3% in October 2008, and then -0.5% in November (there was no change in December). Last year’s comprehensive revision chopped that number down to an annualized -2.1% in July; a later revision took it to -2.7% . Now as seen above, it’s -4.0%. What’s more, 4Q08 is also much worse than before, at -6.8%. It’s amazing what a political party bound and determined to take down an economy in the name of achieving power can do.
  • The downward revision to 2Q08 (from +1.1% to +0.6%) appears to support a contention that the POR Economy’s official beginning might have been sometime in mid- to late-May instead of June of that year. It wouldn’t be surprising if entrepreneurs, investors, and businesspeople picked up on the hostility of Team Obama, which after all had its nomination victory virtually in the bag by late April, earlier than originally thought. That they detected the coming “It’s the Uncertainty, Stupid” situation that this bunch began creating and have continued to build in the two years since would not be surprising.
  • The “Rebound? What Rebound?” alleged “recovery” is about the same as originally thought. 3Q09 was 2.2%; now it’s +1.6%. 4Q09 was 5.6%; now it’s +5.0%, which is far lower than Bush 43′s first blowout quarter (+6.9% in 3Q03) and Reagan’s first blowout year (+7.2% in 1984, or if you prefer, four quarters straddling 1983-1984 that averaged a mind-boggling +8.5%). 1Q10 is better than originally thought (+3.7% vs. +2.7%), but that makes the 2Q10 figure reported today more problematic, especially given that the consensus is that the economy isn’t growing as fast during the current quarter, and may even be contracting again.

UPDATE 2: So here’s the latest on how far we sank and how much of it has been gained back after today’s comprehensive revision:

POReconRecessionAndRecovTo2Q10

What had been a reported shrink of 3.83% is now 4.13%. Thus, as noted earlier, the POR Economy’s recession really was worse than originally thought.

Based on the revised quarterly data, we’re still less than three-quarters of the way back to where we were before the first full quarter during which the POR economy was in effect. It would take another couple of quarters of 2%-plus annualized growth to finally get GDP back to where it was at the end of 2Q08. I’m afraid it will take longer than that to get to that point–and even then, per-capita GDP will have fallen by about 2%-3%.

UPDATE 3: As to the current quarter, inventory growth still was a significant GDP component (+1.05 points), though nowhere near as big as it was during the two previous quarters.

Fixed private investment, which excludes inventory changes, was a +2.09-point component. That line item had its best quarter in a very long time in both its residential and nonresidential elements. There was nice improvement in each nonresidential element, including yet another outsized contribution from “Information processing and software” and an encouraging +0.44-point contribution from “Industrial equipment.” One could argue that fixed investment was long overdue for a good quarter, given how bad previous ones were (after all, you can’t hold out forever, and at some point you have to replace worn-out equipment). But it’s very welcome nonetheless. I just hope it’s not revised downward when better data becomes available.

Government (a +0.88-point component, +0.72 federal and +0.16 state) was a significant growth contributor in the second quarter. Fiscal realities would seem to dictate that this is probably not sustainable.

The stunner is net imports, which came in as a -2.78-point GDP component (+1.22 exports, -4.00 imports). That’s far more negative than seen in any of the previous 11 quarters in the BEA’s report. It seems too negative. If so, GDP may see upward revisions in the next two releases, which would be a welcome change from the track record during previous quarters.

Overall, I’m taking today’s data as “not as bad as feared,” and reason for some guarded optimism.

One big question is how much of today’s reported gain took place in April and May vs. June. Recent economic data indicates that June was probably the worst month of the three.

UPDATE 4: From the Financial Times

President Barack Obama, noting the economy had been growing for a full year, called the GDP numbers “a welcome sign compared to where we were.” But he added: “We’ve got to keep on increasing that rate of growth and keep adding jobs so we can keep moving forward.”

Well, as has been chronicled here since mid-2008, you and your party are why we were where we were — and as noted earlier in this post, we aren’t even back to where we were before you, Pelosi and Reid put us where we were.

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7 Comments

  1. If we are truly headed for a contraction again, (a strong possibility) then any GDP recovery at this point in the game and with this current state of the economy is virtually meaningless.

    Comment by zf — July 30, 2010 @ 11:34 pm

  2. #1, agree, and even though today’s GDP report had some decent positives, I’m not at all certain that it points to a lot of job creation.

    Comment by TBlumer — July 31, 2010 @ 12:17 am

  3. #2, And I’d like to Obama to please explain how the positive items like inventory growth, private investment and inventory changes had anything to do with the “stimulus” funds. It can be even argued some of it like fixed employment for example, was only in fact as bad as it was before BECAUSE of Obamas policies.

    Comment by zf — July 31, 2010 @ 12:45 am

  4. #3, see the latest update. And yes, they’re not responsible for any of it. Any progress made is occurring in spite of them, not because of them.

    I think you meant “fixed investment.” And yes, it was as bad as it was (and still is, considering the steep declines in previous quarters) because of them.

    Comment by TBlumer — July 31, 2010 @ 1:02 am

  5. #4, Close, I meant *private* fixed investment. Sometimes I let my thoughts get ahead of my typing and leave out words.

    Comment by zf — July 31, 2010 @ 1:23 am

  6. So how’s the tax receipts for income earners doing? Which raises the inconvenient question of the SSA trust report is STILL not public yet. Can we infer from the wage earner income tax receipts that SS balance of payments have been negative since last year? Given that they are a fixed percentage of the whole of most wage earners? The Dems are not ready to spin the SS trust account balance of payments yet which means we should force them and the MSM to squirm over it.

    Comment by dscott — July 31, 2010 @ 2:38 pm

  7. [...] Friday, my reaction was that it was ““not as bad as feared,” with “reason for some guarded [...]

    Pingback by BizzyBlog — August 1, 2010 @ 10:11 am

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