2Q2011 Gross Domestic Product: Second Estimate

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The Bureau of Economic Analysis (BEA) estimated 2Q2011 growth in real U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate of 1.0 percent, down from the 1.3 percent rate previously estimated for 2Q, but up from a rate of 0.4 percent in 1Q2011. Private domestic investment (PDI) and personal consumption expenditures (PCE) contributed virtually all of the 2Q growth while government consumption expenditures (GCE) subtracted from it. Net exports (NetX) were a essentially a “wash.” PCE was bumped higher in the latest estimate, while NetX was nearly zeroed out by a higher value of imports.
 

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The Consumer Metrics Institute made this observation about the latest 2Q2011 GDP report:

“This new GDP news release again lowered the BEA's previously reported readings of economic growth rates, and now shows the two most recent consecutive quarters with growth rates below 1% [the actual number was 0.98%, which rounds up to 1.0%].

“-- The good news (relatively speaking) is that commercial fixed investment appears to be improving, although the reported growth rate (1.01% annualized) is still weak by the historic standards of an economy two years into a recovery.

“-- But the bad news is that consumer spending on goods continued to contract. Coupled with that contraction is the fact that inventories were being drawn down as factories dropped production levels even faster than consumption waned.

“-- The ‘deflator’ used to translate the nominal data into ‘real’ data continues to be lower than numbers provided by the BEA's sister agencies [Note: we covered this topic here], and it may be the entire source of the reported growth.

“The continued downward revisions in the data indicate that the BEA is still having difficulty reading this economy. Even though their most recent numbers tell a story of an economy that is admittedly far weaker than it should be if the U.S. was truly well into a ‘recovery,’ it is likely that their measurements of a dynamically changing economy still substantially lag what is really happening.

“Our real concern is that the BEA's track record of late has been one of initial optimism, followed a year later by quiet revisions downward towards a darker reality -- one far closer to what ‘Main Street’ America has been feeling all along. We wonder if this report is any different.”