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Tuesday, July 31, 2012

2Q2012 Gross Domestic Product: First (Advance) Estimate

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The Bureau of Economic Analysis (BEA) estimated 2Q2012 growth in real U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate of 1.5 percent, down noticeably from the upwardly revised 1Q2012 rate of 2.0 percent. Private domestic investment (PDI) and personal consumption expenditures (PCE) contributed to 2Q growth, in that order; net exports (NetX) and government consumption expenditures (GCE) exerted a “drag.”
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Consumer Metrics Institute (CMI) summarized the GDP report as follows:

-- The overall annualized growth rate is weakening. By any measure it is already far weaker than we might expect based on historical trends for the third year of a recovery.

-- The consumer is not the driving force behind the recovery (such as it is). During the most recent quarter the growth in consumer spending for goods contributed only 0.18 percent to the headline number. And although real per capita disposable income did grow at a 2.54 percent annualized rate during the quarter, it has only just now recovered to the level recorded during the first quarter of 2011 -- some five quarters ago.

-- And (perhaps unfortunately from the market's perspective) this report provides cover for the Federal Reserve to do nothing dramatic just prior to the Presidential election. A 1.54 percent annualized growth rate hardly justifies any heroics in any new round of QE monetary interventions -- which could smack of pre-election tinkering from an ostensibly non-political entity.

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