THE Bureau of Economic Analysis just released its second estimate of GDP growth for the second quarter, and the pace of expansion was revised down, from 1.3% to 1.0% (a bit worse than the revision to 1.1% that was expected). The 0.4% first quarter growth estimate wasn't changed, which means that for the first half of 2011 the American economy expanded at a 0.7% pace. That's below the rate of population growth, which is to say that in per capita terms output continues to shrink. So how are things looking forward? Will consider the BEA's take on the improvement in the economy from the first quarter to the second:
The acceleration in real GDP in the second quarter primarily reflected a deceleration in imports, an upturn in federal government spending, and an acceleration in nonresidential fixed investment that were partly offset by decelerations in PCE and in exports and a downturn in private inventory investment.
Imports subtract from measured output, so falling imports made for faster growth—but still signalled a weakening domestic economy. Federal government spending was up slightly in the second quarter, but the net government contribution was still a drag, thanks to falling state and local spending. Moving forward, the federal government will join state and local governments in consistently subtracting from output. Private investment and consumption could make up the gap, but American confidence has been badly shaken by the debt-ceiling battle and financial market havoc.
Does a double-dip loom? It's a reasonable possibility. Much depends on what the Fed does for the remained of the year. As my colleague argues in the print edition, however, it doesn't matter all that much. Growth too weak to generate net employment increases isn't meaningfully better than slow contraction. America is quite likely to get one or the other of those unpleasant alternatives in the second half of 2011.
Did GDP lead us astray again? 2011 Q1: GDP +0.4%; GDI +2.5%. Q2: GDP +1.0%; GDI +1.5%.
GDI is Gross Domestic Income. It's an alternative estimation of national output which in theory is equivalent to the spending-side measure. In practice, however, the two often differ, and some research suggests that GDI is the more accurate of the two—revisions to GDP typically move it closer to GDI.
The GDI figure is particularly interesting here, because it fits much more comfortably with available employment data. Job growth was relatively strong early in the year, and especially from February to April. That makes very little sense when stacked next to the 0.4% first quarter GDP number, and much more sense against the 2.5% GDI number.
It's worth noting, however, that while the GDI figures are stronger than the GDP figures, they still point to a slowdown in economic activity as the year went on, and they still point to an economy performing well below potential in the second quarter.
Source: http://www.economist.com
The acceleration in real GDP in the second quarter primarily reflected a deceleration in imports, an upturn in federal government spending, and an acceleration in nonresidential fixed investment that were partly offset by decelerations in PCE and in exports and a downturn in private inventory investment.
Imports subtract from measured output, so falling imports made for faster growth—but still signalled a weakening domestic economy. Federal government spending was up slightly in the second quarter, but the net government contribution was still a drag, thanks to falling state and local spending. Moving forward, the federal government will join state and local governments in consistently subtracting from output. Private investment and consumption could make up the gap, but American confidence has been badly shaken by the debt-ceiling battle and financial market havoc.
Does a double-dip loom? It's a reasonable possibility. Much depends on what the Fed does for the remained of the year. As my colleague argues in the print edition, however, it doesn't matter all that much. Growth too weak to generate net employment increases isn't meaningfully better than slow contraction. America is quite likely to get one or the other of those unpleasant alternatives in the second half of 2011.
Did GDP lead us astray again? 2011 Q1: GDP +0.4%; GDI +2.5%. Q2: GDP +1.0%; GDI +1.5%.
GDI is Gross Domestic Income. It's an alternative estimation of national output which in theory is equivalent to the spending-side measure. In practice, however, the two often differ, and some research suggests that GDI is the more accurate of the two—revisions to GDP typically move it closer to GDI.
The GDI figure is particularly interesting here, because it fits much more comfortably with available employment data. Job growth was relatively strong early in the year, and especially from February to April. That makes very little sense when stacked next to the 0.4% first quarter GDP number, and much more sense against the 2.5% GDI number.
It's worth noting, however, that while the GDI figures are stronger than the GDP figures, they still point to a slowdown in economic activity as the year went on, and they still point to an economy performing well below potential in the second quarter.
Source: http://www.economist.com
No comments:
Post a Comment