2Q2011 Gross Domestic Product: Final 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 1.3 percent, essentially returning to the initial 2Q estimate, and up from the 0.4 percent for 1Q2011. Private domestic investment (PDI), personal consumption expenditures (PCE) and net exports (NetX) contributed to 2Q growth in that order, while government consumption expenditures (GCE) subtracted from it. As the Consumer Metrics Institute (CMI) reminded everyone, “It is important to remember that this new monthly report covered the same time periods as the previous reports -- meaning that this monthly set of changes in the numbers was caused by late arriving data at the BEA and not actual month-to-month improvements in the economy.”
 

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CMI also made the following observations about the latest 2Q2011 GDP report:

-- Aggregate consumer expenditures for goods was still reported to be contracting during 2Q, dragging the overall growth rate of the economy down by a -0.38 percent rate. This is actually marginally weaker than the numbers in the earlier reports.

-- Consumer expenditures for services grew slightly during the quarter, at an improved (although still very sluggish) 0.87 percent annualized growth rate. But the adjustment in this single line item represented the bulk of the improvement in the headline number.

-- The growth rate of private fixed investments was only slightly higher, at a weak annualized 1.07 percent rate.

-- Inventories are still reported to have been drawn down during the quarter, indicating that production has slowed faster than demand. The revised estimate of inventory levels caused the overall growth rate to be reduced by a -0.28 percent annualized rate.

-- Total expenditures by governments at all levels was still reported to be shrinking, reducing overall economic activity at a -0.18 percent annualized rate.

-- Exports strengthened slightly relative to the earlier report, raising the contribution that they made to the overall GDP growth rate to 0.48 percent.

-- Imports decreased somewhat when compared to the earlier report, and are now reported to be removing -0.24 percent from the growth rate of the overall economy. The combination of the revisions in the import and export numbers contributed about half of the upward changes in the published headline number.

-- The growth rate of "real final sales of domestic product" was revised upward to an annualized 1.62 percent, as the result of the now higher consumer services figures, slightly improved foreign trade and the increased draw-down of inventories.

-- Working backwards from the data tables, the effective "deflator" used by the BEA to offset the impact of inflation was 2.58 percent -- still substantially below the rates reported by their sister agencies. Substituting the line-item appropriate (CPI or PPI) current inflation rate published by the Bureau of Labor Statistics (BLS) causes the "real" GDP to be contracting at a -0.73 percent annualized rate. [Note: we covered this topic here]

-- And using the same alternate BLS deflators the real per-capita GDP can be shown to be contracting at a -1.45 percent annualized rate. Similarly, per-capita disposable income was contracting at a -0.92 percent annualized rate. These per-capita numbers are what impact individual Americans and are the real source of the frustration within the populace.

CMI wrapped up its report this way: “Even at face value the reported 1.34 percent growth rate is either sluggish or pathetic, depending on your chosen inclination to spin. When a more reasonable ‘deflator’ is used to calculate the ‘real’ numbers, the second quarter is actually shown to be in contraction. And when using such alternative BLS inflation data the most recent past quarter is the second consecutive ‘real’ quarter to have such negative growth -- meeting one of the common definitions of a new recession.

“The restive public clearly understands this -- even if the academicians at the BEA don't. The public has been seeing their (per-capita) ‘slice of the pie’ contract now for six months, and no amount of well spun ‘sluggish growth’ can alter their view of a shrinking reality.”