2Q12 Gross Domestic Product Growth (072712); Annualized 1.5%; Prior-Period ‘Recovery’ Revisions Largely Downward
Note: The chart at the right is BEFORE prior-period revisions; it will be updated in the next 24 hours or so. Update, July 28: The revised version is on the right and (at long last!) in the far right column of the layout.
This morning at 8:30 a.m., we’re going to get the government’s first estimate of second quarter economic growth, the twelfth quarter after the recession’s end.
We’re also going to see a comprehensive revision of Gross Domestic Product (GDP) growth going back several years.
The former will be easy to relay, and the news probably won’t be good. The latter, which will tell us how much worse (or not quite as awful) the recession was and how much better (or possible more unacceptable) the recovery since then has been will require some analysis and review.
As to second-quarter growth, analysts have been wearing out erasers knocking down their growth estimates for months as the unimpressive economic news has rolled in.
This morning, Bloomberg’s estimate is an annualized 1.4%.
The Associated Press, in an item by Martin Crutsinger last night (oops, just updated this morning), has 1.5%.
Reuters also has 1.5%.
The graphic at the right compares the post-recession performance under Barack Obama during the past 12 quarters, including an estimate that the second quarter will come in at an annualized 1.5% today, to that seen under Ronald Reagan in the mid-1980s before today’s report hits the streets.
Obama recently claimed in a campaign speech in Oakland that “Just like we’ve tried their plan, we tried our plan — and it worked. That’s the difference.”
Crutsinger at the Associated Press had the best response to that garbage in his write-up last night, a response which I suspect might disappear when the numbers get released, even though it will of course remain true: “The U.S. economy has never been so sluggish this long into a recovery.”
8:30 a.m.: Here we go (full release with tables here; note the slight upward revision to 1Q12) –
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 1.5 percent in the second quarter of 2012 (that is, from the first quarter to the second quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.0 percent.
… The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed investment, private inventory investment, and residential fixed investment that were partly offset by a negative contribution from state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP in the second quarter primarily reflected a deceleration in PCE, an acceleration in imports, and decelerations in residential fixed investment and in nonresidential fixed investment that were partly offset by an upturn in private inventory investment, a smaller decrease in federal government spending, and an acceleration in exports.
Motor vehicle output added 0.13 percentage point to the second-quarter change in real GDP after adding 0.72 percentage point to the first-quarter change.
The comprehensive revisions didn’t come out very well:
* For 2008–2011, the average annual rate of growth of real disposable personal income was revised down 0.1 percentage point, from 0.2 percent to 0.1 percent.
* The percent change in real gross domestic income (GDI) was revised up 0.1 percentage point for 2009, was revised down 0.5 percentage point for 2010, and was revised down 0.2 percentage point for 2011.
* National income was revised down for all 3 years: 0.1 percent for 2009, 0.2 percent for 2010, and 0.5 percent for 2011.
* Corporate profits was revised down for all 3 years: 1.4 percent for 2009, 5.4 percent for 2010, and 6.0 percent for 2011.
More later, but barring a surprise buried deep in the data, we’re worse off than we even thought.
UPDATE: Here are the changes to the first 11 post-recession figures –
3Q09 — was 1.7%, now 1.4%, reduced 0.3 points
4Q09 — was 3.8%, now 4.0% increased 0.2 points
1Q10 — was 3.9%, now 2.3%, reduced 1.6 points
2Q10 — was 3.8%, now 2.2%, reduced 1.6 points
3Q10 — was 2.5%, now 2.6%, increased 0.1 points
4Q10 — was 2.4%, now 2.4%, no change
1Q11 — was 0.4%, now 0.1%, reduced 0.3 points
2Q11 — was 1.3%, now 2.5%, increased 1.2 points
3Q11 — was 1.8%, now 1.3%, reduced 0.5 points
4Q11 — was 3.0%, now 4.1%, increased 1.1 points
1Q12 — was 1.9%, now 2.0%, 2.0 increased 0.1 points
The net increase over the eleven quarters is 1.6 percentage points.
Bottom line: The recovery during the first eleven post-recession quarters was even worse than originally estimated. Before the revisions, and before looking at the changes in the degree of contraction during the recession, the government estimated that the economy was 6.75% larger in March 2011 than it was in June 2009. That growth estimate since the recession ended is now 6.33%, which is .42 points (or 6%) lower.
I’ll have to look at it later, but based on the big writedowns during the first half of 2010 noted above, I think the point at which the economy returned even to where it was before the recession began (and of course, before even thinking about increases in population) came even later than originally estimated.
UPDATE 2: Pethokoukis –
In addition, the GDP report shows the Obama administration has continually overestimated the positive impact of its economic policies, including the $800 billion stimulus plan:
– In August of 2009, the White House—after having a half year to view the economy and its $800 billion stimulus response—predicted that GDP would rise 4.3% in 2011, followed by 4.3% growth in 2012 and 2013, too. And 2014? Another year of 4.0% growth.
– In its 2010 forecast, the White House said it was looking for 3.5% GDP growth in 2012, followed by 4.4% in 2013, 4.3% in 2014.
– In its 2011 forecast, the White House predicted 3.1% growth in 2011, 4.0% in 2012 and 4.5% in 2013, 4.2% in 2014.
– In its most recent forecast, the White House predicted 3.0% growth this year and next, and then back to 4.0% after that. The current consensus is for 2013 growth to be a lot like 2012 growth.
“It worked,” my a**.