Skip to main content

Chart on GDP for second quarter 2012
(Calculated Risk)
Annual growth in seasonally and inflation-adjusted gross domestic product took a dive to 1.5 percent in the second quarter of 2012, the Bureau of Economic Analysis reported this morning. The number was slightly better than the consensus of experts had forecast. It compares with an adjusted level of 2.0 percent in the first quarter of the year. In 2011, the GDP grew at a rate of 1.8 percent.

This is the 12th consecutive quarter of growth in real GDP. Casting aside all the flaws in GDP as a measuring tool, this is a lousy, although not unexpected report. Once again, the happy-talkers who ridiculed critics that questioned their beginning-of-the-year projections of 3-plus percent GDP growth, are left to make their excuses. The drop confirms what many analysts have been saying since March: Economic growth remains sluggish.

Corporate profits are at record levels, compensation for the magnates of Wall Street are soaring again, trillions of dollars are tucked into off-shore hideaways out of the taxman's reach and hoi oligoi are buying more luxury goods than ever. But growth in the number of jobs for people outside this golden circle of affluence is likely to remain well below what is needed to reduce the vast ranks of the unemployed, millions of them out of work for six months or longer.

Today's is the "advance" measurement of GDP for the quarter. Two short-term revisions will be made in August and September. Longer-term revisions in GDP measurement will also be made, like the tweaks the BEA announced this morning for 2009-2011.

GDP gauges the total reported output of goods and services. As many critics have noted over the years, it fails as a measure of people's well-being. Robert F. Kennedy said it succinctly in 1968: GDP "measures everything, in short, except that which makes life worthwhile." GDP leaves out things such as income inequality, the intensity of poverty, economic security, crime costs, the economic value of civic and voluntary work, the economic value of unpaid housework and child care, educational attainment and life expectancy. It’s a measure that assigns zero value to leisure time, to the depletion of mineral and other natural resources, to the benefits of saving, to trade imbalances, to deficits and debt.

This weakness has sparked numerous efforts to develop a better gauge or at least 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.

Recognizing the limitations of the GDP report, one number worth focusing on in today's release is final domestic sales. This is GDP minus the change in private companies' inventories. In today's report, this came in at 1.2 percent. In the first quarter it was 2.4 percent  Household purchases rose 1.8 percent, the same as in the first quarter.

Much of the slowdown in growth in the second quarter was caused by a softening in consumer spending as Americans eased off on automobile purchases due to tepid job and income growth.

Consumer spending, which makes up about 70 percent of U.S. economic activity, increased at a 1.5 percent rate, a step down from the 2.4 percent pace logged in the previous three months.

Consumer spending was the weakest in a year. Much of that reflected a drop in spending on long-lasting goods such as automobiles, which had buoyed consumption in the prior period.

The price index for personal consumer expenditures in the second quarter, which measures inflation, grew 0.7%. That compares with a 2.5% gain in the first quarter. The core inflation rate, which leaves out food and energy prices because they are so volatile, rose 1.8 percent during the second quarter. The CIF rose 2.2 percent in the first quarter.

Having been burned by predicting in December 2010 that GDP expansion would be as high as 5 percent for 2011, forecasters had become cautious about their predictions of GDP growth for 2012 by late last year. They began changing their minds early in 2012 until, by April, they had raised their estimates for this year to as high as 2.6 percent. Not exactly blazing, but far better than things have turned out. Changes in the economic picture since the end of March have spurred lowered estimates, so much so that in the week before today's report the consensus estimate had fallen to 1.3 percent.

(Continue reading after the fold.)

The International Monetary Fund has lowered its estimate and now forecasts 2 percent annual growth in GDP for all of 2012. That's the same level at The Wall Street Journal's economic forecasting survey. But these are optimistic assessments in the view of others. Michael Feroli at JP Morgan projects 1.4 percent growth.

“We’re seeing weak numbers pretty much across the board,” said Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York. “Softening consumption is definitely a big part of the slowdown. The uncertainty over Europe and the fiscal cliff will impinge on business decisions and activity.”
The slowdown can be seen in other recently released economic statistics:

• Retail sales fell in June for a third consecutive month, the longest period of declines since 2008.

• Gains in new payroll jobs slowed to an average 75,000 in the second quarter, down from 226,000 in the prior three months. That's the weakest since the third quarter of 2010.

• The Commerce Department said on Thursday that durable goods orders (excluding the volatile transportation market) dropped 1.1 percent in June. That's the biggest decline since January.

• While the housing market has showed some signs of improvement in recent months, sales of existing homes fell to an eight-month low in June.

• The Philadelphia Federal Reserve Branch survey for July was negative for the third consecutive month. Two other branches, New York and Cleveland, are showing slower activity.

• Small businesses' confidence in June took its biggest drop in almost two years.

• The Conference Board Index of leading indicators has declined for two of the past three months.

• Most of Europe not already there is sliding into recession.

Originally posted to Meteor Blades on Fri Jul 27, 2012 at 05:59 AM PDT.

Also republished by Daily Kos.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Sorry to say that it feels like (4+ / 0-)

    the new normal to me.

    Eliminate tax breaks that stimulate the offshoring of jobs.

    by RJDixon74135 on Fri Jul 27, 2012 at 06:03:05 AM PDT

  •  Grammar nerd here with quibble... (1+ / 0-)
    Recommended by:
    Meteor Blades

    Title should read, "...but not quite as badly as expected."

    Love ya, MB! :)

    I ♥ President Barack Obama.

    by ericlewis0 on Fri Jul 27, 2012 at 06:03:21 AM PDT

  •  Little mention of the effect of government (2+ / 0-)
    Recommended by:
    fladem, billlaurelMD

    spending (from MarketWatch):

    Another drag on growth was lower government spending, which fell 1.4% at all levels. Federal outlays dropped 0.4% and state and local spending fell a steeper 2.1%.
    How much does government spending contribute to GDP?

    The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt. Bertrand Russell

    by accumbens on Fri Jul 27, 2012 at 06:05:31 AM PDT

    •  More than 25% of total GDP (1+ / 0-)
      Recommended by:
      3goldens

      Almost all state and local spending (except state share of food stamps other welfare programs, retirement payments) is counted in GDP, in the range of 16-17%. Federal is only spending on direct operations. Ttransfers to people (social security, retirement), transfers to states and interest payments are excluded. That leaves us with roughly another 10%.

      The GOP is the party of mammon. They mock what Jesus taught.

      by freelunch on Fri Jul 27, 2012 at 06:23:20 AM PDT

      [ Parent ]

      •  Thanks! Is there a way to calculate what the (0+ / 0-)

        drop of 1.4% in government spending translates into for the GDP number?  In other words, how much higher would GDP have been if government spending was flat or up by 1.4%?

        The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt. Bertrand Russell

        by accumbens on Fri Jul 27, 2012 at 06:52:53 AM PDT

        [ Parent ]

        •  Sure (0+ / 0-)

          If the private economy grows 2.0% and the public economy shrinks 1.4% the economy increases

          (2.4*.75 + (-1.4 * .25)) = 1.8 - .35 = 1.45%

          Change assumptions about government spending:

          (2.4*.75 + 0 * .25) = 1.8%

          Government grows as fast as private:

          (2.4*.75 + 2.4 * .25) = 1.8 + .6 = 2.4%

          Numbers are approximations.

          The GOP is the party of mammon. They mock what Jesus taught.

          by freelunch on Fri Jul 27, 2012 at 07:10:48 AM PDT

          [ Parent ]

      •  There's the "active" drag on gov. spending (1+ / 0-)

        by the gop in terms of laying off teachers, etc. and then there's the "passive" drag in terms of not passing a "climate/infrastructure/jobs" bill, that would stimulate private investment in new areas, like solar power, and create millions of new jobs.
        I'd guess that's hard to calculate.

        You can't make this stuff up.

        by David54 on Fri Jul 27, 2012 at 07:03:03 AM PDT

        [ Parent ]

        •  It's a big project, but (3+ / 0-)

          The only real constraint on government spending is ability to get capital for it. Taxes and borrowing are the methods. Given that the government can borrow money for less than inflation, it is rational for it to borrow as much as it needs to build new infrastructure and give people jobs. Only at the point that the government is starting to crowd out the private sector for capital or labor does the question of whether the government is spending too much arise.

          The GOP is the party of mammon. They mock what Jesus taught.

          by freelunch on Fri Jul 27, 2012 at 07:13:50 AM PDT

          [ Parent ]

          •  The gop knows this, that's why they're doing every (0+ / 0-)

            thing they can to suppress gov spending right now.
            I'm hoping that when Obama is re-elected their will will be broken. I know most of the congressmen are dying to get the defeat of Obama over with so they can go back to loading up on the pork for their districts.

            You can't make this stuff up.

            by David54 on Fri Jul 27, 2012 at 07:30:06 AM PDT

            [ Parent ]

  •  Shouldn't the last bar be blue? (4+ / 0-)
  •  WSJ: Govt. intervention helped? What? (3+ / 0-)
    Recommended by:
    Meteor Blades, JeffW, fladem
    Those who favor bigger government spending to boost the economy just got some more ammunition.

    According to the government’s latest number-crunching exercise — they revised old economic data while taking their first crack at how the economy performed in the second quarter — the Great Recession of 2007-2009 wasn’t as Great as we thought. Sure, it was the worst economic calamity since World War II, but the abyss we sank into three years ago wasn’t as deep as we thought. The reason? Government spending provided a cushion.
    ...
    Whether or not government spending is the right prescription for America’s ailing economy is hotly contested among politicians. Democrats, including President Obama, argue outlays on things like crumbling infrastructure help fill the gaping hole left when private industries throttle back investment and hiring. Republicans counter that increased spending makes America’s long-term financial problems even more insurmountable.

    When it comes to raw numbers, though, it’s just simple math. The most popular measure of gross domestic product is called “expenditure-based” GDP. This measure of all the goods and services produced in an economy counts up spending by Americans on things like food and clothes, along with whatever the government shells out on military and teachers. That means if the government spends, the economy will grow.

    http://blogs.wsj.com/...

    Filed under: Things You Thought You'd Never See

  •  Economic sabotage (1+ / 0-)
    Recommended by:
    Meteor Blades

    Mitt Romney and the GOP need to tell the 5 million Americans hired in the last two years that those jobs "aren't enough." The American economy is moving in the right direction. Contrary to the lies and exaggerations of an out-of-touch Mitt , Obama has not made the jobs picture "worse." Millions of new jobs have been added over the last three years and the needle continues to point forward. But America will never be able to fully recover until conservative lawmakers and Republican politicians stop their strategy of jobs sabotage and get on the page of helping this country, not just their own political aspirations. -  Principled Progressive

    •  Job sabotage? Nonsense. (0+ / 0-)

      You don't need to firebomb Dresden to prove that you can fly the plane.

      by SpamNunn on Fri Jul 27, 2012 at 06:42:11 AM PDT

      [ Parent ]

      •  The Republicans have done all they can (0+ / 0-)

        to stop the economy from growing.

        They should have supported a massive jobs bill in 2009, but they refused to do anything to help America -- they have not improved. Business has all the money it needs to hire people, they are not hiring. The government needs to stop laying people off.

        The GOP is the party of mammon. They mock what Jesus taught.

        by freelunch on Fri Jul 27, 2012 at 07:16:59 AM PDT

        [ Parent ]

        •  I own a small business. If I had the (0+ / 0-)

          work, I would hire people to do it.  The Congress doesn't make people spend money they don't have - not yet, anyway.  

          You don't need to firebomb Dresden to prove that you can fly the plane.

          by SpamNunn on Fri Jul 27, 2012 at 07:26:55 AM PDT

          [ Parent ]

          •  P.S. Has anyone ever told you that (0+ / 0-)

            you don't exist?  ; )

            You don't need to firebomb Dresden to prove that you can fly the plane.

            by SpamNunn on Fri Jul 27, 2012 at 07:29:14 AM PDT

            [ Parent ]

            •  Of course (2+ / 0-)
              Recommended by:
              3goldens, Meteor Blades

              With my nick, I honor Art Laffer, the pied-piper of fake economics who took all of the critical thinking skills of the GOP away with his intentionally misleading claims about the Laffer Curve. I'm sure Art knows that tax cuts in the US do not pay for themselves, but that doesn't stop him from continuing to sell the snake oil that the GOP has been drinking for the last three decades.

              The GOP is the party of mammon. They mock what Jesus taught.

              by freelunch on Fri Jul 27, 2012 at 07:39:50 AM PDT

              [ Parent ]

          •  Every time a public employee loses a job (1+ / 0-)
            Recommended by:
            3goldens

            The economy contracts.

            Congress needs to spend more money to get the economy growing. Instead, government, particularly at the state and local levels, is shrinking and making the economy smaller.

            If the government bought more from you, you would hire more people.

            The GOP is the party of mammon. They mock what Jesus taught.

            by freelunch on Fri Jul 27, 2012 at 07:31:47 AM PDT

            [ Parent ]

            •  I don't depend on handouts for my living. (0+ / 0-)
              If the government bought more from you, you would hire more people.

              You don't need to firebomb Dresden to prove that you can fly the plane.

              by SpamNunn on Fri Jul 27, 2012 at 08:00:48 AM PDT

              [ Parent ]

            •  Maybe, maybe not. (2+ / 0-)
              Recommended by:
              Meteor Blades, SpamNunn

              It doesn't matter WHERE the money gets spent so much as THAT the money gets spent.

              If cutting the government employee causes money to be freed up that is spent elsewhere -- either in the public or private sector, the economy may shrink, stay the same, or grow, depending on whether the new use is more or less productive than the old.

              No wonder economists can't reliably forecast the end result of economic interventions.  Too many variables, too many conflicting interests.

              LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

              by dinotrac on Fri Jul 27, 2012 at 08:40:57 AM PDT

              [ Parent ]

              •  Today (0+ / 0-)

                Lending rates are zero. Unemployment is 8%. Underemployment is roughly the same. At that point it is absolutely clear that cuts in government spending will not be offset by the private sector. The private sector is rolling in money and hiring very few people.

                The GOP is the party of mammon. They mock what Jesus taught.

                by freelunch on Fri Jul 27, 2012 at 09:55:49 AM PDT

                [ Parent ]

                •  The private sector is not rolling in money. (1+ / 0-)
                  Recommended by:
                  SpamNunn

                  PARTS of the private sector are rolling in money.

                  I spend a lot of my time with small businesspeople -- not the folks who hobnob with the pundits and power players.

                  Few of the folks I know are rolling in money.

                  Most are keeping their heads above water, but most have had to cut back and, most painfully, lay off employees, to keep a cash flow that will support their families (and I don't mean vacation in Europe style support).

                  The Fortune 500 is flashy, but there are a ton more small businesses and they normally constitute a major chunk of the economy.

                  LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

                  by dinotrac on Fri Jul 27, 2012 at 10:15:29 AM PDT

                  [ Parent ]

  •  So much for the wealthy being "job creators". (3+ / 0-)
    Recommended by:
    JeffW, freelunch, 3goldens
    Corporate profits are at record levels, compensation for the magnates of Wall Street are soaring again, trillions of dollars are tucked into off-shore hideaways out of the taxman's reach and hoi oligoi are buying more luxury goods than ever. But growth in the number of jobs for people outside this golden circle of affluence is likely to remain well below what is needed to reduce the vast ranks of the unemployed, millions of them out of work for six months or longer.
    I guess they must be waiting to create those jobs once that black man is out of office.

    /snark

    "Ridicule is the only weapon which can be used against unintelligible propositions." - Thomas Jefferson

    by rfall on Fri Jul 27, 2012 at 06:13:36 AM PDT

    •  Yup. Jobs are demand driven, not profit driven. (1+ / 0-)
      Recommended by:
      rfall

      Companies exist to make profits, and they will do that or go out of business. If you can maximise your profits by hiring more people and ramping up activity, that's what you'll do.  If cutting back and laying off maximises profits, you'll do that instead.

      I must admit, however, to getting pretty sceptical  about economic numbers these days.  For example, the emphasis on the classical unemployment rate and new unemployment claims ignores the fact that the number of people who receive unemployment has actually been increasing, and that ignores the unemployed who don't receive benefits.

      Likewise, business reports focus on stock market indexes and market prices, but don't much mention that volume on the exchanges is significantly down because of all the small investors who have gone away.  The index numbers do not translate into nearly the same dollar figures.

      LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

      by dinotrac on Fri Jul 27, 2012 at 08:46:42 AM PDT

      [ Parent ]

  •  The buck does not stop in the Cayman Islands, (1+ / 0-)
    Recommended by:
    JeffW

    like it or not.

    You don't need to firebomb Dresden to prove that you can fly the plane.

    by SpamNunn on Fri Jul 27, 2012 at 06:23:46 AM PDT

  •  The middle class needs a raise. (5+ / 0-)

    This is pretty simple stuff. Ordinary Americans need more money to spend.

    The simple solution is a tax increase for the rich, taking money out of savings, and a tax cut for the middle class.

    Republicans are blocking Obama's plan and hurting everyone.

    •  And a whole lot of us need to get good jobs (1+ / 0-)
      Recommended by:
      3goldens

      so that we can rejoin the mdidle class and overcome the disaster that should be called the Not-So-Great-Depression, and probably would be called that if more people got their noses out of numbers and took a look around them.

      LG: You know what? You got spunk. MR: Well, Yes... LG: I hate spunk!

      by dinotrac on Fri Jul 27, 2012 at 08:48:19 AM PDT

      [ Parent ]

  •  Could Have Been Worse, (1+ / 0-)
    Recommended by:
    FutureMan

    but might even be good because it may cause the Federal Reserve to pull the trigger on further stimulus.

  •  A positive number is good (0+ / 0-)

    At least we are not in a rescission which would put Romney in a better position.  As long as the prez can point to things slowly getting better he should be fine.

  •  Washington Post Election Model (2+ / 0-)
    Recommended by:
    freelunch, Sharon Wraight

    If I'm using it correctly, the Washington Post Election Model says that with a GDP growth of 1.75% (rough average of First Quarter's 2% & Second Quarter's 1.5% - no 3rd Quarter numbers in yet) and an approval rating of 46%, President Obama has an 81% chance of being reelected. So today's numbers, although not great, certainly don't spell doom for his prospects for a second term. Bump him up to 48% Ii'll spot him 2 points for Mitt's World Tour Charmless Offensive) and he goes up to 84%.  I'd take those odds...

    •  Ray Fair's election model differs (0+ / 0-)

      We all know that models are not crystal balls, and Prof. Fair's may not be the best.

      Fwiw, according to Fair's model, in order for Obama to get 50.01% (of the 2-party vote), at this point he needs a very unlikely 3.21% growth in the 3rd quarter. This assumes inflation stays at 1.78 for 2009-2012.

      Fair's model has a dummy 'Good News' variable for growth over 3.2%, so if it reaches 3.21% it pushes Obama over 50%.

      first qtr    2.0   
      2nd qtr    1.5    est
      3 qtr    3.21    needed
          2.24    avg
      GoodNews Quarters: 2
      It is unlikely inflation will drop, in fact it might rise somewhat, but not enough to offset the GoodNews -- if 3.21% growth occured in Q3.

      But no-one expects such growth -- in fact, as the diarist points out:

      The International Monetary Fund has lowered its estimate and now forecasts 2.0 percent annual growth in GDP for all of 2012. That's the same level at The Wall Street Journal's economic forecasting survey. But these are optimistic assessments in the view of others. Michael Feroli at JP Morgan projects 1.4 percent growth.
      2% growth gives Obama 49.30%, 1.4% gives him 49.17%.

      Again, this is only a model -- not a crystal ball.

      I think Obama will win -- but I think it will be close (OH, FL...).

  •  Maybe QE3 next week (0+ / 0-)

    Three are plenty of rumors that Bernanke will announce a version of QE3 next week at the FED meeting.  If he does, it'll give a big boost to the markets, confidence, and the economy.

    Unfortunately, I don't buy it and don't believe things are bad enough for Bernanke for him to step in, yet.

  •  Slow growth is a good thing. (0+ / 0-)

    Compared to a fictitious "bubble" economy.
    The problem is gop obstruction, both active, in terms of Republican state legislatures and governors laying off teachers and firemen, etc. and passive, in terms of Congress and states dropping all of the anti-woman legislation and getting to work on a serious climate/jobs/infrastructure bill which would be immediate top priority if the Dems had the House and Senate.

    Then we could chart steady growth that would be sustainable and actually help the average American get a leg up.

    People have a short memory.

    You can't make this stuff up.

    by David54 on Fri Jul 27, 2012 at 06:58:59 AM PDT

  •  Also left to once again make excuses: (0+ / 0-)

    the people who've been predicting a double-dip recession since late 2009.

    While we're tweaking people for being Wrong On The Internet.

    Art is the handmaid of human good.

    by joe from Lowell on Fri Jul 27, 2012 at 07:55:40 AM PDT

  •  Before we get our panties in a bunch, let's (2+ / 0-)
    Recommended by:
    FutureMan, equern

    remember that just about any year's worth of quarters has economic data all over the damned map, hi and lo, and that's always been true no matter how far back you go.  Mostly it has to do with the collection of the data and somewhat to the massaging of the data with various formulas to eliminate static like seasonal variation.  And a lot of these adjustments are a judgement call   ;-).  look for an upward revision in October.

    Romney: Wrong on GM. Wrong on bin Laden. Wrong on fiscal austerity and wrong for America. I voted for change. Where is my vote?

    by SGWM on Fri Jul 27, 2012 at 10:00:55 AM PDT

  •  Take A Look (0+ / 0-)

    at the stock market, punching thru 13,000 today.  This is not consistent with major, impending weakness.

    •  Other factors in play (1+ / 0-)
      Recommended by:
      Meteor Blades

      The stock market is rising because the European Central Bank is taking thought to be taking add'l steps to save the Euro which might allow the US economy to avoid a major hit.

      So the rise isn't so much a reflection of US economic strength, but rather of the mitigation of a possible foreign problem that would affect the American economy.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site