Tag Archives: GDP

Q1 GDP Down 2.9%: Admin says – meh

Today we learned that the Gross Domestic Product of the United States decreased by 2.9% in the first three months of 2014 – a number greatly different than dismal .1% increase the administration reported initially.

How could this be? According to the Huffington Post Obamacare had just saved the economy from contraction.. or something.

As the U.S. economy teetered on the brink of contraction in the first quarter, one thing stood out. Healthcare spending increased at its fastest pace in more than three decades.

That surge is attributed to the implementation of President Barack Obama’s signature healthcare law, the Affordable Care Act, also known as Obamacare. Because of Obamacare, the nation narrowly avoided its first decline in output in three years.

After the report showing that things were not so rosy, the excuses came fast and furious – no pun intended – from the White House, liberal news and even some economists. The weather was the cause.

Unfortunately for the apologists, most economist believe that the weather only affected the economy to the tune of about 1% of GDP – so where did the rest go?

According to the Wall Street Journal, some, but not all, appears to come from healthcare spending:

Spending on health-care services declined at a 1.4% annualized pace in the first quarter, compared to an earlier estimate of a 9.1% increase. That revision contributed to a revision of gross domestic product to a 2.9% annualized decline from an earlier estimate of a 1% decline.

The WSJ report tells us that even more pain is yet to come thanks to Obama’s attack on one of the largest parts of the American economy:

Michael Feroli, a J.P. Morgan Chase economist, said spending increases related to the new health-care law that didn’t show up in the first quarter “may ramp up more gradually throughout the year.”

For the second quarter, housing starts are down, inventories are down… heck, everything is down. Even the Federal Reserve isn’t acting like Americans are experiencing a recovery (as if they don’t know it.)

The real test will be the second quarter numbers. If we get two quarters of negative growth, Obama will have a recession he’ll get to call his own. Then again, we know he’ll never take the blame so we’ll quietly await Obama’s version of the “Malaise” speech while we all sit back and “eat cake” as instructed by our great leader.

GDP Growth Increasing 3% In July – Not Because Of Obama Policy Change

What is this thing called Gross Domestic Product (GDP)? It is everything produced by all the people and all the companies in the US and in the world. Key upon the word “produced” in the preceding sentence. Until now, the word “produced” referred to the total market value of all final goods and services produced in a country in a given year. But the definition of “produced” will change in July of this year.

Being generous and not including negative GDP growth that occurred during the first three quarters of Dear Leader Barack Hussein Obama’s first reign (er, term), the GDP growth rate has been 2.12 percent, not something to crow about. The GDP growth rate for the fourth quarter of 2012, after Obama was re-elected, was a whopping 0.4 percent.

However, in July 2013, there will be a world-wide redefinition of the GDP, of what is produced. Government statistics will take into account components such as film royalties and spending on research and development. Billions of dollars of intangible assets will enter the GDP of the US economy. The redefinition is expected to add about three percent to the GDP growth rate. Brent Moulton, manager of national accounts at the Bureau of Economic Analysis, said:

“We’re capitalising research and development and also this category referred to as entertainment, literary and artistic originals, which would be things like motion picture originals, long-lasting television programmes, books and sound recordings. At present, R&D counts as a cost of doing business, so the final output of Apple iPads is included in GDP but the research done to create them is not. R&D will now count as an investment, adding a bit more than 2 per cent to the measured size of the economy.”

Redefinition is fine. Just remember that apples should not be compared to oranges. But that minor technicality won’t phase Obama. I’m betting that Obama and his economic team will take credit for the GDP growth increase. He and they will conveniently forget to mention the definition change, will instead trumpet their policies as the reason for the growth. And we can expect the MSM to go right along with him. There is, after all, precedent. Look at what the MSM did with unemployment numbers – particularly just before the 2012 election.

But (and there is always a “but” when Obama is involved), the GDP growth rate will be in excess of five percent, well above what economists say is the “ideal” growth rate of about 2 to 3 percent per year. Too much GDP growth causes inflation. Expect economists to change the definition of “ideal” in order to support Obama.

So, come July, when the GDP growth rate jumps due to some accounting miracle, just remember that the economy is not really heating up. Rather remember what is actually going on, that Obama’s economic policies have not changed.

H/T to Tom, who called the GDP situation to my attention.

But that’s just my opinion
Please visit RWNO, my personal, very conservative web site!

GDP up due to federal spending

The Commerce Department published its preliminary estimate of third quarter GDP showing an increase to 2.0% growth vs. the second quarter final number of 1.3%. Tearing into the numbers, government spending and a drop in imports seem to be the largest reason for the favorable change to GDP, while commercial investment, exports and private inventory investment were leading declining values in the final number.

Components of GDP

The largest impact to GDP in the report is the federal government. Real federal government consumption expenditures and gross investment increased at a whopping 9.6% after having decreased .2% in the previous. Defense spending increased 13% and non-defense spending increased 3%. Both segments of federal spending had decreased in the prior quarter.

Autos saw a complete reversal from the second quarter numbers. Declining .47% this quarter after having added .2% in the second.

Exports of goods and services took a dramatic turn as American offerings headed overseas tumbled 1.6% after a 5.3% increase in the prior quarter. Imports declined .2% which, because imports are a subtractive component of GDP, raised the number by an equivalent amount.

The report also shows an acceleration in price increases for consumer products of 1.5% which likely explains all but .5% of the personal consumption expenditures that added to the GDP number. It appears as though consumers only spent more because they had to due to price inflation, not out of renewed confidence in the economy.

Business spending tumbled in the current quarter. After having increased 3.6% in Q2, business cut spending 1.3% on real estate, equipment and software –  a clear sign businesses are unable to grow in the current economic and regulatory climate. This represents the biggest drop in three years.

The Economy’s Effect on Wage Earners

Personal current taxes increased more than $13.2 billion in the current quarter after having risen $20 billion in the second.

While prices increased in the third quarter, real disposable personal incomes (money left over after taxes) slowed. After having risen 3.1% in the second quarter, real income only increased .8% in the third – a disturbing trend if prices continue to climb along with tax demands from the government.

State of the Economy

Several U.S. manufacturers reported dismal revenue numbers and even bleaker views of the near future. Dow, Google, and even Apple missed expectations or lowered guidance in recent earnings reports. Looking at the Commerce Department’s release today, it is obvious that businesses are unable to grow in the current climate.

Personal incomes are decelerating while costs are rising which is squeezing the pocketbook of American families.  American families increasingly dipped into savings to deal with rising costs – something that cannot continue forever.

While the GDP number has increased, the numbers underneath show a much darker picture heading into the fourth quarter.

GDP drops, manufacturing takes nosedive

The Department of Commerce released its National Income and Product Accounts report this morning which showed the economy declining much faster than analysts had expected.

Despite steady government spending, the second quarter Gross Domestic Product (GDP) came in much lower than Q1 and strongly down from analysts expectations. The first quarter GDP came in at 2.4% growth and the second quarter was forecast to slow slightly to 1.7%. Instead, the actual data shows the economy coming startlingly-close to recession at 1.3% for the second quarter.

Federal government consumption spending stayed nearly flat only decreasing .2% in Q2. The drop in economic activity is solely due to a decline in private sector output – the driver of any turnaround in the economic and jobs pictures.

Personal spending slowed almost 40% from the first quarter and durable goods reversed from growth to recession in today’s report. Durable goods orders crashed from 11.5% increase in Q1 to a decrease of .2% in Q2 – a decline of 11.7% quarter-over-quarter. Q2’s decline is the largest in 3 1/2 years and one not seen since the previous recession.

Nonresidential fixed investments also showed significant slowing in the second quarter. Losing almost 50% growth, the indicator slowed from 12.9% increase in Q1 to 7.5% in the second quarter. This indicates the business are not able to expand into larger or more numerous facilities.

Corporate profits before taxes decreased $16.3 billion in the second quarter with the financial industry being hit hardest. Domestic profits of financial corporations decreased $39.7 billion in Q2 after having dropped $12.7 billion in the first quarter.

The overall picture is one of a rapidly decelerating economy. If GDP drops another 1.1% in Q3, the economy will be in stagnation. Considering the rate of change, a continuation in the current trend could see the country in recession by the end of Q3.

WashPost Front-Pager on Collapsing Net Worth Missing One Word: ‘Obama’

A new economic report from the Federal Reserve doesn’t offer much hope. On the front page of The Washington Post,  Ylan Q. Mui underlined “the Federal Reserve said the median net worth of families plunged by 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on par with where they were in 1992.”  

Furthermore, “the data represent[s] one of the most detailed looks at how the economic downturn altered the landscape of family finance. Over a span of three years, Americans watched progress that took almost a generation to accumulate evaporate. The promise of retirement built on the inevitable rise of the stock market proved illusory for most. Homeownership, once heralded as a pathway to wealth, became an albatross.”  What’s more interesting is that Mui’s article doesn’t mention Obama once  — in a front page piece during an election year — right after he told reporters the private sector is “doing fine.”

Mui quotes Mark Zandi, economist for Moody’s, saying “It’s hard to overstate how serious the collapse in the economy was…we were in free fall.” However, some have taken this to be another indictment of Bush administration policies.

Steve Kornacki at Salon.com noted that despite this terrible news, Obama may still succeed at blaming Bush.  He cites an Obama 50% approval rating andin  “an upcoming book, political scientists John Sides and Lynn Vavreck used data stretching back 60 years to create a model that predicts presidential approval based on economic conditions. As of the end of 2011, Obama was racking up scores significantly better than the model suggested he should be.”

Furthermore, “Sides and Vavreck suggest that, among other things, Obama may be benefitting from the public’s lingering memory of George W. Bush’s presidency and, more specifically, the imploding economy he passed off to Obama in January 2009. The new Fed figures may support this idea, in that they illustrate how steep, and pervasive and enduring the decline in family income has been since the final year of Bush’s tenure.”

After four years, a failed stimulus, high unemployment, three consecutive trillion dollar deficits, and an unconstitutional trillion dollar new health care entitlement program, it’s still somehow Bush’ s fault.

This default setting liberals have displaying their animosity towards Bush is both amusing and painfully insufferable.  When will they criticize the president for failing to take responsibility on the economy?

Kornacki states that “Obama won’t be able to run a Morning in America campaign, but he’s counting on context winning out, with a crucial chunk of voters remembering what he inherited (and, perhaps, understanding the obstruction he’s faced from Republicans in Congress) and giving him the benefit of the doubt, even if they’re not enthusiastic about it. For now, his poll numbers suggest Obama might actually pull this off. But the election is still five months away, and it’s an open question whether his support can withstand more discouraging unemployment reports and all of the Republican attacks to come.”

Is the US Going To Need a Bailout?

In terms of national debt as a percentage of Gross Domestic Product (GDP), the answer is “YES!” How, you ask, do I arrive at that answer? Well, let’s examine the debt as a percentage of GDP in Portugal, Ireland, Greece, and Spain (PIGS), as well as in the US.

First, let’s examine the debt as a percentage of GDP in PIGS. These four countries received bail outs from the European Union (EU).

  • PORTUGAL, 2011 Debt as a percentage of GDP: 108%, Bailout amount: €78 billion in May 2011. Fitch ratings agency has cut the credit standing of Portugal to BB+, junk-bond status.
  • IRELAND, 2011 Debt as a percentage of GDP: 108%, Bailout amount: €67.5 billion agreed to in November 2010. Fitch Ratings gives Ireland’s sovereign debt rating a BBB+, although it said there was at least a one-in-three chance that the current Irish rating would be lowered by the end of 2012 or in 2013.
  • GREECE, 2011 Debt as percentage of GDP: 165%, Bailout amount: €110 billion in May 2010 rescue package. A February-March 2012 agreement gave Greece another €130 billion in loans and cut €105 billion off its national debt by asking private investors to accept losses on the Greek bonds they hold. Fitch Ratings has downgraded Greece’s sovereign debt from B- to CCC, the lowest possible grade for a country that is not in default.
  • SPAIN, 2011 Debt as a percentage of GDP: 68.5%, Bailout amount: Estimates range from €40 billion to €100 billion, but the bailout is for the banking system, not public finances. Spain’s banks are struggling with toxic property loans. (sound familiar?) Fitch Ratings downgraded Spain’s long-term foreign and local currency issuer default ratings to BBB from A, with a negative outlook. The BBB credit rating is just a notch higher than junk status.

Now let’s examine the US situation. The Congressional Budget Office (CBO) released new projections of a worsening US fiscal outlook. The CBO report says that by the end of fiscal 2012 (September), federal debt will reach about 70% of GDP, the highest level since just after World War II, and up from about 40% in 2008. Without changes in current policies, federal debt would reach about 200% of GDP in 25 years.

This source illustrates what is actually happening to the debt as a percentage of GDP. Under President Obama, the debt as a percentage of GDP went from 86.4% at the end of 2009 to 99.7% at the end of 2011. So you can see that, using actual data, debt as a percentage of GDP has surpassed Spain, is knocking on the door of being the same as in Portugal and Ireland. If CBO estimates are to be believed, unless fiscal policy changes, the US will surpass Greece.

Further, Fitch Ratings (one of the world-wide big three ratings companies, along with Standard & Poor’s and Moody’s) said again that it would cut the US sovereign debt credit rating unless government creates a “credible” fiscal consolidation plan and reduces the deficit. Ed Parker, sovereign ratings analyst, said that the US is the only country (of four Fitch major AAA-rated countries) which does not have a credible fiscal consolidation plan, and its debt as a percentage of GDP is expected to increase over the medium term. In November, 2011, Fitch revised down its credit outlook for the United States to negative from stable. A negative outlook signifies there is a greater than 50% chance of a credit rating downgrade.

Standard & Poor’s, in August, 2011, cut the US credit rating to AA+ from AAA. It has held it with a negative outlook ever since. Moody’s Investors Service has the US rated at Aaa, also with a negative outlook as of November, 2011.

The EU has bailed out PIGS. When it becomes the US’s turn for a bail out, to whom will we turn? And, will we have to cede sovereignty in order to get a bail out? Part of the terms of the bail outs for Greece, Ireland and Portugal included visits by foreign financial monitors to make sure they are complying with rules imposed on their handling of their economies.

But that’s just my opinion.

Please visit RWNO, my personal web site.

Throwing Good Money After Bad

The Labor Department reported that the U.S. economy added 69,000 jobs last month, the lowest number since May of last year. Concurrently, the unemployment rate increased for the first time in eleven months. The “official” jobless rate rose to 8.2%. Additionally, it reported that in the past two months 49,000 fewer jobs were created than originally stated. The Bureau of Labor Statistics also revealed that in America, 766,000 fewer women are employed today than in January 2009, when the current administration first took office.

As a result, the U.S. Stock Market dropped. GOP presidential candidate Mitt Romney called the news “devastating” and the White House blamed George W. Bush, claiming they “are still fighting back from the worst economic crisis since the Great Depression”. The White House keeps insisting that their economic policies are helping America dig out of “the deep hole caused by the recession”.

Three years and five months into his term, barack obama still has no answers as to how to get America’s economy growing at anything faster than a snail’s pace. That’s bad for America. It could also devastate his re-election chances. That prospect is good for America.

Since he took office all obama has done is sign extreme, far left fringe, anti-business, anti-energy, anti-growth “progressive” legislation into law. Bills passed by the ilk of Nancy Pelosi, Harry Reid, Barney Frank and Chris Dodd or farmed out to the likes of the George Soros funded Tides Foundation. His only personal efforts were appointment of the Simpson Boles Commission, whose suggestions he summarily dismissed, and his budgets, which for the past two years have yet to receive a single vote in the U.S. Senate, which is controlled by his own Party.

The ‘stimulus”, misrepresented as financing for “shovel ready projects”, was, among other wasteful ventures, redistribution of taxpayer’s money to his political cronies involved in mismanaged “green energy” companies. Or to States deep in debt due to over zealous, business killing regulations and historically discredited tax and spend policies. Those States were in desperate need of revenue to pay the bloated cost of pensions and benefits owed to their unionized government employed political campaign financiers and foot soldiers.

obama overstepped his Constitutionally limited power as Chief Executive by interfering in bankruptcy proceeding for GM and Chrysler. The Harvard Law School graduate “determined” that hundreds of years of bankruptcy court precedent would not sufficiently suit his political needs and thereby dictated that the financial interests of secured bondholders would be seized and transferred to his union supporters in the UAW.

his foreign policy has been an utter disaster. Yes, he was convinced by Secretary of Defense Leon Panetta that it would be OK to “get” Osama bin Laden. Something for which obama has been most eager to accept sole credit. But that opportunity was set up by a number of people working within the U.S. intelligence community for close to a decade…not to mention the coordinated effort of U.S. Special Forces and other branches of the military involved in carrying out the operation. Since then, his White House has somehow managed to leak enough information about the top-secret operation to get a friendly Pakistani intelligence operative imprisoned for a few decades. That will certainly provide a most powerful recruiting inducement to potential operatives going “forward”, won’t it? Philosophically driven by a strong desire to shift America’s image in the world away from that created by his predecessor, obama enacted a new doctrine. One that focuses on systematically killing via predator drone rather than capturing the enemy and obtaining useful national security information by submitting them to enhanced interrogation techniques. Better to deprive people of life than to submit them to physical discomfort. Only “progressives” would consider that a move to the moral high ground.

If that’s not enough, his “most significant achievement”, obamacare, is about to be ruled unconstitutional by the U.S. Supreme Court.

The list could go on and on and on…and on, but is it really necessary to list all the committed atrocities about which obama’s opponents are already aware? That his supporters will vehemently deny?

At this point it would be very profitable to play poker with those still donating to obama’s re-election campaign. They seem quite unaware of a mistake that accomplished gamblers vigorously and conscientiously avoid: “Throwing good money after bad.”


BEA Releases Revised 1st Quarter and Initial 2nd Quarter GDP

Bureau of Economic Analysis// 
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 1.3 percent in the second quarter of 2011,
(that is, from the first quarter to the second quarter), according to the “advance” estimate released by the
Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.

The Bureau emphasized that the second-quarter advance estimate released today is based on
source data that are incomplete or subject to further revision by the source agency (see the box on page
3). The “second” estimate for the second quarter, based on more complete data, will be released on
August 26, 2011.

The estimates released today reflect the annual revision of the national income and product
accounts (NIPAs). In addition to the regular revision of estimates for the most recent 3 years and the
first quarter of 2011, current-dollar GDP and some components are revised back to the first quarter of
2003. In cases for which the estimates for the reference year (2005) are revised, this results in revisions
to the levels of the related index numbers and chained-dollar estimates for the entire historical period;
revisions to percent changes before the first quarter of 2003 are small. Annual revisions, which are
usually released in July, incorporate source data that are more complete, more detailed, and otherwise
more reliable than those previously available. This release includes the revised quarterly estimates of
GDP, corporate profits, and personal income and provides an overview of the results of the revision.

The August 2011 Survey of Current Business will contain NIPA tables and an article describing
the revisions. The complete set of revised estimates will be available on BEA’s Web site at

The Economy Stinks and the GDP Doesn’t Have a Clue

We all gain an understanding of gross income vs. net income when it comes to tax time and many of us forget the relationship shortly after.  What do these two terms have to do with our economy?

The U.S. G.D.P. (Gross Domestic Product) is an indicator of the total of goods produced with no regard to the cost of producing those goods.  Gross simply indicates the positives with total disregard of the negatives.  Your gross income simply states what you brought in without taking into account any costs against that income (deductions).  The resultant is net income.

This becomes important in looking at how our Gross Domestic Product rose.  It did not do so on the basis of productivity or demand alone.  GDP rose because the government gave it no other choice.  Even the White House has not argued against the fact that cash-for-clunkers and the stimulus package are totally responsible for the current positive GDP.

That means that 100% of the GDP increase came by taking money away from the economy (the private sector).  We also have a measure called Net Domestic Product which would more accurately measure the strength of the true economy, but no one is talking about that number.  In fact, I can’t seem to find it on the Bureau of Economic Analysis website or much of anywhere else.

Imagine that you brought in $60,000 gross income in 2009, but you spent $60,000 to get it.  Obviously, you wouldn’t have gotten to keep anything and your net income would show that.  You would have had a net income of $0.  That’s where we really are in Q3.  A GDP that was totally brought about by spending our own money.  That’s a net of zero, zilch, nada, nothing.

The concern isn’t just the absolutely misleading indicator that GDP can be when the costs of that product are not quantified.  It’s what happens when the input to that product are removed.  For our economy, that’s the already over cash-for-clunkers, the recently-ended first-time home buyers tax credit and the White House admitting that the stimulus probably won’t provide much more than it already has.  When all of that taxpayer funded productivity is gone… we have a mess in the form of a double-dip recession or W-shaped recovery.  These are typically slaughters for all those that believed that the economy was improving instead of understanding that the government was just making it appear as though it was improving.  Many people leverage themselves (new car loans, credit card debt, etc) or invest a large portion of their nest egg thinking that things can only get better.. only they don’t.

The government tells us that GDP made its largest gains in a long time, but then we look at the fact that consumer spending took the largest drop in more than 9 months and that real incomes (our paychecks) haven’t gone up at all during the Obama reign).  70% of our economy is directly tied to consumer spending and our money.  It’s obvious where the increase in productivity came from and it had nothing to do with a basic improvement in the American economy.

Business understands this and is continuing to lay-off or hold-steady on employment and investment.  Professional investors understand this and are trying to get out while maintaining some profit (lately it just looks like they’re getting out).  Some Americans understand what’s going on and are deleveraging (paying off credit cards, loans, and real-estate) at an historic pace.  When we look at the fact that 9 banks failed this past Friday, it would be hard to see a picture as-rosey as Obama would have us believe.