Q2 GDP = 3.3% (kinda)
GDP is out, ticking higher to 3.3% rather than 2.7%
And if you believe that data, I also have a bridge for sale in Brooklyn.
Why the beat on the headline figure? Aside from the usual inflation nonsense, there were two other factors: Exports, which rose to 13.2% (versus earlier reported 9.2%) and Inventories, which also played a part in the apparent strength.
My fishing buddy John Silvia of Wachovia put it into context:
"The overwhelming story is that the export numbers have offset this domestic weakness in consumer spending and business investment. We have a domestic recession.''
Also worth noting: larger than earlier reported gains in every single government expenditure category. If you are wondering why the government does not know what it is actually spending in near real time, welcome to the club.
Looking forward, I must note that Q3 does not have a stimulus package, but it *will* have a stronger dollar . . .
chart via Jake from EconomPic Data
>
Previously:
Fuzzy Numbers (August 2008)
http://bigpicture.typepad.com/comments/2008/08/fuzzy-numbers.html
Source:
GDP Second Quarter 2008 (Preliminary)
Bureau of Economic Analysis, U.S. Department of Commerce
8:30 A.M. EDT, THURSDAY, AUGUST 28, 2008BEA 08-38
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
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» Is BEA Measuring Growth or Inflation? from The Big Picture
We noted earlier today that the Bureau of Economic Analysis reported revised Q2 GDP data at a better-than-expected annualized 3.3%. As discussed in the comments, the measure of Inflation is crucial to getting an accurate read on GDP (or Durable Goods).... [Read More]
Tracked on Aug 28, 2008 12:01:42 PM
Comments
I dont but investing is becoming a tad difficult if the reports are crap. System based on trust, lol
Posted by: moonoverseattle | Aug 28, 2008 8:52:50 AM
The BS is becoming blatant. Whatever happened to subtlety?
Neocon IQ test. Which of these does not belong?
WMD in Iraq.
It was all Russia's fault.
GDP 3.3%
Fantasia
Reality
Posted by: Winston Munn | Aug 28, 2008 8:55:36 AM
If the Fed believes the data, they should raise rates (3.3% GDP growth is well outside the slow/recession arena).
If the Fed doesn't believe the data, they should raise rates (3.3% GDP growth is overstated due to understated inflation numbers).
So what's the Fed to do? Cut, I suppose.
Posted by: Mike J | Aug 28, 2008 8:55:50 AM
Ha! I told you the economy was fundamentally strong.
Let me count the ways Phil Gramm is smarter than you.
Whine, two, three...
Posted by: John McCain | Aug 28, 2008 9:10:14 AM
Mike J: Exactly! Due to two things I'd hate to be sitting in the hot seat right now. With this result the FED should be FORCED to raise rates, all the numbers look fine so there is no recession by their own admission. (Or else they have to admit the whole damn number scheme is ludicrous) Second, this will be one REALLY tough number to compare to come next qtr/year.
Posted by: Rob P. | Aug 28, 2008 9:14:07 AM
2Q GDP now 3.3%, up from 1.9%
The preliminary GDP report revealed a larger than expected upward revision to 2Q GDP to 3.3% QoQ annualized from 1.9% in the advance report. Most of the upward revision came from government, which is now 3.9% versus 3.4% previously, and inventories, which are still a drag on GDP at -$49.4B but less than the -$62.2B originally reported. The core component of the report, final domestic demand, came in at a still-soft 1.5% versus 1.3% previously, with government adding more than half of that gain. As expected, we saw an even further narrowing in the trade deficit, to -$376.6B from -$395.2B on a combination of higher exports and lower imports. Thus net trade is adding 3.1 percentage points to GDP growth versus 2.4% -- so virtually all of GDP was the result of trade.
Given the obvious slowdown in global growth, there is material risk that this sector
will not be as supportive of growth in the quarters to come.
Posted by: Sheryl King | Aug 28, 2008 9:18:05 AM
Barry,
You are not being consistent. Even if the GDP numbers are biased they have been biased consistently. Therefore the 3.3 number is still relatively better than the 1.9 or 2.7. Maybe in real terms it is not actually 3.3 but it is higher than would have been expected.
I also don't understand by increased imports is a bad thing. It means relatively speaking the the US consumer is saving more. Something that you have said needs to happen.
I believe we are in a recession. I also believe there is tremendous risk over the next 12-18 months. However, I think that this 3.3 is relatively GOOD news.
-Dom
Posted by: Dominic | Aug 28, 2008 9:25:21 AM
What was the price deflator number they used? That is key.
In the preliminary report last month I believe they used a deflator (inflation measure)of about 1%, when even by the government's own skewed measuring system the CPI is about 5%.
So, if you take the nominal number and then tell a whopper of a lie in how much you decrease it to take inflation back out, well, sure, you can say everything is JUST FINE!
the lies just keeping getting more and more blatant
4 more years?
Posted by: DenverKen | Aug 28, 2008 9:30:57 AM
Sheryl King, can't agree with you more. It looks to me to be the old "pump the numbers game as much as possible before the election to help the politicians remain in office," game.
Posted by: Concerned Citizen | Aug 28, 2008 9:32:44 AM
BR,
Your statement about a Q3 stimulus package may need to be revised later on. Every single time I hear Barney Frank speak he talks about how he wants a second stimulus. It might be coming man.
What is even more annoying about these numbers is now you will hear a lot of the "we aren't in recession" camp saying I told you so.
Posted by: ben | Aug 28, 2008 9:40:51 AM
Yes, Sheryl is completely correct. The next two quarters will be much less impressive.
The powers that be want the first recessionary quarter to be on Obama's watch so they will keep manipulating the numbers as long as they possibly can.
Barry is right. The $ rally will kill exports as unemployment kills domestic spending. Q3/4 is dead in the water.
Watch the rally today, then get short again. This is the way the game is played.
Posted by: leftback | Aug 28, 2008 9:46:37 AM
If GDP rose above 3%, isn't inflation still a risk as opposed to the "inflation is no problem" mantra from the gov. How can anyone invest in this market with conflicting data and compromised public officials.
Posted by: larster | Aug 28, 2008 9:46:48 AM
Totally bizarre!!
How could we possibly be in the same world?
The data tracking this so-called economy we have is going to fall off a cliff the moment the last vote is counted.
Then comes the undeniable/unstopable downturn of the economy that the incoming party is obviously somehow responsible for. Much like when, the pubs continue to ask the question earlier in the year of "what inflation?" to the point, it became totally ridiculous.
Now comes, "what recession?", followed by "what financial melt down?". And of course, by then it will all be the Dems fault and the Pubs will already be looking toward winning seats back in the 2010 Congressional races.
It is absolutely amazing how long reality can be denied, deceived & derided? It only makes the eventual outcome all the more painful.
Posted by: BG | Aug 28, 2008 10:01:26 AM
Barry I'm surprised you didn't reference this excellent post.
Fuzzy Numbers
Tuesday, August 12, 2008
http://bigpicture.typepad.com/comments/2008/08/fuzzy-numbers.html
~~~
BR: Done!
Posted by: km4 | Aug 28, 2008 10:03:02 AM
"How can anyone invest in this market with conflicting data and compromised public officials."
How can anyone believe in this Government with conflicting data and compromised public officials.
Yet McCain (Bush 3) is almost even in the polls.
Dom, consumers are not saving more, their wages are falling while prices are inflating. The amount of income the have is shrinking compared to what they buy, so they buy less with the same amount. This is not more savings.
Posted by: edhopper | Aug 28, 2008 10:03:20 AM
"Exports, which rose to 13.2%"
I thought everyone was adamant there is no decoupling, who's buying this stuff and for how much longer??
Posted by: Gavin | Aug 28, 2008 10:04:26 AM
...and Tiffany beat.
If you didn't buy anything from Tiffany & Co in the last year, you might want to re-think if the party you've been supporting is really the party that's supporting you.
Posted by: VennData | Aug 28, 2008 10:07:21 AM
1.2% chain deflator says it all.
Posted by: Neal | Aug 28, 2008 10:20:11 AM
Doesn't more government spending now, without an increase in taxes lead to more debt? So regardless of what the "growth" number says, in the long run, increased and unregulated govt spending will simply keep adding to the debt burden that will have to be paid at some future point. Bless em accounting tricks, the tooth fairy really works her magic in the govt!
Posted by: Viv | Aug 28, 2008 10:29:24 AM
BR--
Looking at the BEA data for "real GDP" as reflected in chained dollars since 2000, one finds the following:
--Real GDP grew by 0.47% Q/Q in 2008Q2, or about 2% annualized. Somehow "seasonal adjustments" get that to 3.3%.
--The same data set shows that real GDP grew by 1.8% Y/Y for the second quarter.
Seems to paint a much more realistic picture of the US economy.
Terry
Posted by: Terry | Aug 28, 2008 10:30:27 AM
Barry,
If the GDP number next quarter comes in negative, will you believe it, or are you only skeptical about positive GDP numbers? The U.S. economy (along with the economies of other first world countries) certainly has its problems, but you seem ideologically committed to maintaining a persistently gloomy outlook. You no longer seem to be objectively responding to the data.
Incidentally, your friend's comment that we are in a "domestic recession" is almost an Orwellian distortion. Where does he think those exports are being manufactured? Here in the U.S., of course, where factories at big exporters such as John Deere and small exporters such as Graham Corporation are booming. Parts of the U.S. benefiting from the secular bull markets in commodities are booming as well, e.g., Houston. New York City isn't representative of the rest of the country.
~~~
BR: The sign in the front of the GDP data does not make any difference to this analysis. The GDP data should inform you about the amount of economic activity (i.e., genuine growth), and to do that, you need to accurately understand how much of the nominal gains are price inflation. Even a negative 0.6% overstates true growth.
Say you live in a country that produced $100X worth of widgets in Year 1. In Year 2, it produced $110X worth of widgets. What was your GDP gains? 10% ? 0% ? Or something in between?
If you want to know what the real -- not nominal -- rate of growth is, you have to know how much of that gain was inflation. Understate inflation and you overstate growth. Whether the quarterly data point is positive or negative is utterly irrelevant.
This is a very simple concept, I am at a loss as to why some people can't understand it.
Posted by: DaveinHackensack | Aug 28, 2008 10:32:23 AM
I guess we can quit laughing at the Chinese for their grossly "inflated" growth figures. We're in their camp now. Aren't they looking at a stimulus package and desperately trying to save their equities market also?
Posted by: bk | Aug 28, 2008 10:33:07 AM
I live in asia, where economic numbers and their veracity have long been the butt of endless jokes among the expat financial community. looks like the tide is turning.
Posted by: billy | Aug 28, 2008 10:38:19 AM
And what would GDP have been adjusted for inflation? Or is GDP never adjusted for inflation?
Posted by: OkieLawyer | Aug 28, 2008 10:38:26 AM
it used to be called "new math", now's it's "they're playin' our song".
-the smoker you drink, the player you get-
Posted by: yikes | Aug 28, 2008 10:48:56 AM
