As measured by growth in real, that is, inflation-adjusted, gross domestic product, the economy is still dragging, a report from the Commerce Department's Bureau of Economic Analysis
showed Wednesday. From April through June, seasonally adjusted real GDP grew by 1.7 percent on an annualized basis. While better than expected, that is, depending on your point of view, modest or weak. GDP for the first quarter, which had last been reported in June as 1.8 percent, was revised by the bureau to 1.1 percent. The second-quarter number will be revised in August and September as better data are obtained:
The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed investment, private inventory investment, and residential investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased. [...]
Real personal consumption expenditures increased 1.8 percent in the second quarter, compared with an increase of 2.3 percent in the first. Durable goods increased 6.5 percent, compared with an increase of 5.8 percent. Nondurable goods increased 2.0 percent, compared with an increase of 2.7 percent. Services increased 0.9 percent, compared with an increase of 1.5 percent. [...]
Real federal government consumption expenditures and gross investment decreased 1.5 percent in the second quarter, compared with a decrease of 8.4 percent in the first. National defense decreased 0.5 percent, compared with a decrease of 11.2 percent. Nondefense decreased 3.2 percent, compared with a decrease of 3.6 percent. Real state and local government consumption expenditures and gross investment increased 0.3 percent, in contrast to a decrease of 1.3 percent.
While growth in the GDP in the first half of the year has been slower than most economists and business analysts forecasted last December and early January, the expectation is that the second half of the year will be better as a consequence of an improved housing market, higher business spending and a reduced impact of government spending cuts. For instance, investment in the housing market rose 13.4 percent in the second quarter. However, since consumer expenditures make up two-thirds of the GDP, the first-quarter-to-second-quarter drop of 0.5 percent—2.3 percent to 1.8 percent—in that spending gives reason for caution.
Together with the report on the most recent GDP performance, the BEA also released the results of its overhaul of GDP all the way back to 1929. Adding in new measures, it said, gives a more accurate picture of what's actually going on. The revisions showed the economy did slightly better in 2012 than previously reported: 2.8 percent vs. 2.2 percent.
There's a bit more about the GDP below the fold.
As always, because of the flaws in its gauge, it's important to use the GDP in conjunction with other economic factors when measuring the economy's health. Which is why Robert F. Kennedy's caveat from 1968 still resonates:
"Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product - if we judge the United States of America by that - that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans."
Flaws in the GDP have spurred many experts to try to develop a better gauge or supplements to it. These include France's
Commission on the Measurement of Economic Performance and Social Progress, Canada's
Genuine Progress Index (a version of which has recently been tried out in Maryland), the
Human Development Index and the
Gini coefficient.