Skip to comments.U.S. GDP Miss Far Bigger Than Announced, Real GDP Is 0%
Posted on 04/29/2012 2:37:08 PM PDT by blam
U.S. GDP Miss Far Bigger Than Announced, Real GDP Is 0%
Housing-Market / US Economy
Apr 29, 2012 - 10:21 AM
By: Mike Shedlock
The Advance Estimate for Q1 GDP came in at 2.2%, down from 3.0% in the previous quarter, and below most mainstream media estimates of 2.5%.
However, my friend BC notes ....
The GDP deflator is reported to have averaged 1.2% annualized in the past 2 qtrs. Had the trend rate from '11 persisted, the deflator would have subtracted 2.6% annualized from real GDP, resulting in a 2-qtr. growth of real GDP of 0%.
ECRI's Achuthan would appear correct that a recession were imminent instead of looking like a dummy.
Rick Davis at the Consumer Metric Institutes makes a similar calculation.
In their "advanced" estimate of the first quarter 2012 GDP, the Bureau of Economic Analysis (BEA) found that the annualized rate of U.S. domestic economic growth was 2.20%, down more than three-quarters of a percent from the fourth quarter of 2011. The vast bulk of the downturn was in commercial activities, with both fixed investments and inventories lowering the headline number substantially. Consumer spending on both goods and services improved slightly, and the ongoing contraction in governmental spending moderated somewhat. The BEA's bottom-line "real final sales" improved about a half-percent to an annualized growth rate of 1.61% -- hardly robust and certainly not the kind of numbers we would expect to see nearly three years into a recovery.
Once again the BEA has used "deflaters" that will strain the credibility of the public, especially if they buy gasoline. To correct the "nominal" data into "real" numbers the BEA assumed that the annualized inflation rate during 1Q-2012 was 1.54%. As a reminder, lower "deflaters" cause the reported "real" growth rates to increase -- and once again very low seasonally adjusted BEA inflation "deflaters" have been the headline number's best friend. If the raw "nominal" numbers were instead "deflated" by using the seasonally corrected CPI-U calculated by the Bureau of Labor Statistics (BLS) for the same time period, nearly the entire headline growth rate vanishes -- and the resulting growth rate would have been a minuscule 0.08% with "real final sales" contracting.
And real per capita disposable income actually shrank during the quarter shrank at an annualized -0.27% rate (from $32,699 per capita to $32,677 per capita) -- and it remains lower than it was 5 quarters ago. -- even using the BEA's optimistic "deflaters." Real-world households likely felt the pinch even more.
Doug Short at Advisor Perspectives has some interesting charts is his post GDP Q1 Advance Estimate Disappoints at 2.2%.
This chart shows the disturbing trends.
GDP Trends Average growth since 1945 is 3.3% Linear regression says growth is trending lower at 2.1% Over the last 10 years, growth averages a mere 1.7% Take a good look at the last decade. The US only managed 1.7% growth in the biggest housing boom in history followed by the biggest multi-trillion dollar global stimulus effort in world history.
Three years into a recovery, growth (if you believe preposterous deflators) is a mere 2.2% but only 0% if you don't. Moreover, with parts of Europe in an outright depression, with even Germany and the UK in recession, and with China slowing significantly, the odds the US economy decouples for too much longer is now approaching zero.
I think the ECRI has its recession forecast reasonably correct. However, it may take a well-deserved GDP revision (likely after the next election) to prove it.
The Certainty and Dramatic Language of ECRI's Recession Call
What was particularly striking about ECRI's current recession call is the fervor and certainty of the language in the public press release:
Here's what ECRI's recession call really says: if you think this is a bad economy, you haven't seen anything yet. And that has profound implications for both Main Street and Wall Street.
Note the complete absence of wiggle room in the announcement, nor have there been any public communications from ECRI to qualify or soften its recession call. ECRI has put its credibility on the line.
Seven months have now passed since the ECRI recession call, which coincidentally occurred on the same day that the Federal Reserve announced Operation Twist (see this update on the effectiveness the Fed's strategy). Has Fed policy been a factor in delaying or eliminating the recession ECRI saw in its crystal ball?
They can delay but they will only make the crash worse when it comes. I am completely distraught over the long-term unemployed. Real, needed jobs are shrinking and I grieve for those who will never get back to a solid middle class paycheck or have to live off the partial support of family.
This is bad. We are in a full on economic depression that is deepening, disguised only by the economic smokescreen of the FED and the breadline smokescreen of EBT cards and unemployment checks.
There are people out there who are nearly suicidal to find work and others who are deeply frustrated they can’t find anything beyond McDonalds fry cook or Starbucks Barrista.
This is really bad, and the EU hasn’t even collapsed yet.
The pace of a depression comes so slowly that you can’t feel the full effect of the contraction and deleveraging. But individual people out there certainly can.
Obama is toast, a one term wonder. No way he gets re-elected in this economy. No way. ABO.
Globalism’s chickens have come home to roost...
These days about 40.75% of GDP is government spending. So if government spending increases by 5%, that means GDP increases by better than 2%. But you’re no better off, unless you can find a way to pay your mortgage with your share of the benefit from a bridge to nowhere.
Obama and the fedgov are lying. The inflation and other numbers they put out are BOGUS.
Romney needs to call them on this. The people KNOW that Obama is lying.
Ridicule is in order.
When the Republicans win the WH and both houses of congress and begin spending cuts, that's when TSHTF, eh?
They'll be dumped in two years and replaced with Democrats who (increase spending) will send us into an inflationary spiral and possibly hyperinflation, eh?
Fedgov - Pissing on our backs and telling us it’s raining.
As if Republicans will cut spending.
If France goes socialist, that could be the final straw that collapses the EU which will spread the contagion globally. Add a win for zero, and recovery will be impossible.
I don't think a recovery is possible...some temporary improvements around the edges maybe,but a full recovery, nah.
See the link in post #7, No Way Back.
This is What Depression Looks Like; Real Corporate Earnings Collapse Nearly 50 Percent Below 1973 Levels
Here are your charts for proof.
” The inflation and other numbers they put out are BOGUS.”
Leave me out of this! I had nothing to do with it!
Is it no wonder that stagflation is here again. Same policies same problems. Washington never learns.
No recovery...No way out Bump
Your chart shows “middle-class income peaked 1972”. Intriguing that was right before WaterGate.......a real coup by the unelected.....
Nixon ended the ‘gold standard’ in 1971. Is there a connection? I don’t know but I believe as long as the ‘elite’ manipulate currencies, we’re screwed. We need sound monetary policy but no one wants the pain it will take to get there.
Wow, that is bad! Thanks.