Friday, August 27, 2010

UPDATE: GDP revision of Second Quarter growth an anemic 1.6%, double-dip fears grow

Hot off the Bureau of Economic Analysis website at

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.6 percent in the second quarter of 2010, (that is, from the first quarter to the second quarter), according to the "second" estimate released by the Bureau of Economic Analysis.  In the first quarter, real GDP increased 3.7 percent.

     The GDP estimates released today are based on more complete source data than were available for the "advance" estimate issued last month.  In the advance estimate, the increase in real GDP was 2.4 percent.

It’ll be interesting to see which one of the major media outlets is the first to trot out the MSM’s favorite adverb to describe this year’s tepid economic data.  Unexpected or not, such a sharp downward revision in GDP growth for the second quarter magnifies concerns that the economy may be on the precipice of a double-dip recession. 

Those fears are justified because frankly, the Obama regime’s toolkit for addressing a second slip into negative growth territory is pretty much empty.  The stimulus has failed to allow the economy to gain the necessary altitude and airspeed it needed to avoid a stall, while adding hundreds of billions to the deficit and piling on more debt.  Such a development should—but probably won’t—put the last nail in the coffin for demand-side Keynesian economic policy.  There should be no Stimulus II—the federal budget just doesn’t have room for another round of wasteful, pork barrel spending.

At this point, the best thing the government can do now is simply get out of the pockets of America, and get the hell out of the way of the American economic machine.  Extend the Bush tax cuts (in perpetuity).  Stop the onslaught of new regulations, lift the deepwater drilling moratorium, and stop creating the fog of uncertainty that clouds businesses’ outlook.  Businesses, markets and consumers aren’t stupid.  They don’t make large, potentially game- or life-changing decisions under such toxic, uncertain conditions.

Residential investment—a key component in the outlook for potential growth—was up 20% (revised downward from the 27% advance figure) in the second quarter, reflecting the last of the new homeowner tax credit bump.  That’s not likely to carry forward into Q3, as new home sales have been dismal since the expiration of the tax credit.

If there’s one bright spot in the current, bleak economic picture, it’s that the voting public is more likely than ever to vote for real change in November.  The Democrats’ mid-term fate seems to already be baked in the cake.

UPDATE: Poring over the tables, nothing in particular stands out, except for the afore-mentioned growth in RI and the unlikelihood of maintaining that momentum.  The downward revision from 27% to 20% doesn’t change the prospects of maintaining housing sector growth through the third quarter.  The economy continues to be dominated by personal consumption expenditures (70% of the $13.2 trillion revised total), but that number has barely moved since Q1 of 2009.  That’s a key to understanding the sluggishness—consumers simply aren’t consuming at a rate of growth strong enough to pull the economy up.  So, if you’re an Obama supporter and you need to find a scapegoat, blame it all on Main Street.

Gimme some feedback in the comments.