Well…It Could be Worse

Updates to the Gross Domestic Product numbers for quarter two aren't good, but they could have been worse. Still, the risk of recession is considerable.

The BEA has revised downwards its estimate of second quarter GDP. The good news is that the economy grew in the second quarter even with more complete data on which to make the various calculations. On the other hand growth is very anemic now at 1% (seasonally adjusted and annualized). And keep in mind that there is one more revision to go so it could be revised even lower. For example the first quarter GDP increased, in real dollars, only 0.4%. In looking at growth in real dollars for the past year or more we see that growth recently peaked in 2010 (quarter 1) at 3.9% and the growth rate has been steadily declining. And in real terms personal consumption expenditures have been decreasing for April – June, if that trend continues then things are going to be looking rather bad for the anemic expansion. The PCE data for July will be available on Monday, lets hope it is good news.

FILED UNDER: Economics and Business
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Moosebreath says:

    It could also be better, and would have been if state and local governments were not shrinking so fast. Nearly all of the revision is because the rate they shed jobs was greater than originally thought.

  2. john personna says:

    There are a lot of bad data, but the one I like least is the new unemployment claims. It seems to be “ringing out” to a level matching the 2001-2002 recession.

    Stability at around 400K is very bad.

  3. Ben Wolf says:

    The PCE data for July will be available on Monday, lets hope it is good news.

    There won’t be significant, sustained increases in consumer spending until the private sector can deleverage. It can’t net save and spend simultaneously.

  4. racehorse says:

    suggestion – Loosen up the free market: eliminate capital gains tax and other taxes on small businesses, eliminate a lot of the strangling regulations, red tape, licensing (taxes), etc.
    Do away with Dodd – Rangel laws
    Watch the economy take off.

  5. Ben Wolf says:

    @racehorse: The economy won’t do anything until people start spending. Also, we got into this mess long before Dodd-Frank, so your assertion that repealing it will somehow be beneficial is empirically false.

  6. robert wilson says:

    Will global oil production constrain economic growth?

    http://motherjones.com/kevin-drum/2011/08/wee-bit-more-oil-and-economy