Oops! Economic Growth Wasn't So Great After All

CNBC ^

[Perdogg]

U.S. economic growth regained speed in the first quarter, but not as much as expected, which could heighten fears the already weakening economy could struggle to handle deep government spending cuts and higher taxes.

[old and tired]

My understanding is that the rewrite goes all the way back, but when I saw your question I looked for confirmation of that to post a link and couldn’t find one. I did hear them talking about it a good bit on CNBC this week.

[ChildOfThe60s]

Thank goodness for the new statistical methods to figure GDP starting in July. Growth will be back and good times here again for all.

[Wyatt's Torch]

Calculated Risk:

Personal consumption expenditures (PCE) increased at a 3.2% annualized rate, and residential investment increased 12.6%. However equipment and software increased only 3.0%, and non-residential investment in structures declined slightly.

“Change in private inventories” added 1.03 percentage points to GDP in Q1 (reversing most of the decline last quarter), and the Federal government subtracted 0.65 percentage points (mostly a decrease in defense spending). State and local governments continued to decline.

This was below expectations of a 3.1% growth rate, but domestic demand was decent with PCE and private investment increasing. I’ll have more on GDP later ...

[Wyatt's Torch]

Look at post 14. It contains the data on government spending decreases.

[Wyatt's Torch]

There is no way they would make that change and not adjust all periods.

[newfreep]

Drudge has link showing 2.5%

[Wyatt's Torch]

Zero Hedge

Overhyped Q1 GDP Grows By Only 2.5%, Biggest Miss To Expectations Since September 2011

Less than an hour ago we speculated that "it wouldn't be surprising for GDP to come substantially weaker than expected, only to be revised higher (or lower) subsequently." Sure enough, we have gotten at least the first part right for now, with the advance Q1 GDP number printing a very disappointing 2.5%, on expectations of a 3.0% increase, up from 0.4% in Q4, and the biggest miss since Q3 2011. The reason for the big miss: Inventory and Fixed Investment came well below expectations, comprising 1.03% (of which autos represented 0.24%) and 0.53% of the 2.5% annualized increase GDP. Kiss the great CapEx investment story goodbye.

The only silver lining in today's otherwise very weak report: Personal Consumption Expenditures, which were a sizable 3.2% versus the 2.8% expected, and amounted to 2.24% or virtually all of the net Q1 GDP growth. So far so good .The bad news, however, is that this number will not sustain into Q2 and look for expenditures to plunge in the coming quarter. Finally, let's not forget that it rained like 5 days in March, so there's that. And of course, very soon, all GDP will be revised to add intangibles, so in retrospect Q1 GDP will likely have grown by a Ministry of Truth blush-inducing 10% or so.

And for those confused why the spending spree led "recovery" won't last, the answer is simple: the US consumer is out of money, as can be seen by this savings (or lack thereof) rate chart.

Source: BEA

[Alex in chains]

The economy is “struggling because of deep government spending cuts”???

#1- Have there been real cuts in spending? Or are the increases less than liberals desire?

#2- And government needs to spend even MORE than Obama has been doing to get the economy out of the dumps? Really?

[1rudeboy]

How far back?

"We are carrying these major changes all the way back in time - which for us means to 1929 - so we are essentially rewriting economic history," said Mr Moulton.

[Wyatt's Torch]

WSJ:

Five Takeaways from Today's GDP Report:

The U.S. economy grew at a rate of 2.5% in the first three months of 2013 –much better than the 0.4% growth rate at the end of 2012, but well below economists’ expectations. Experts are still digesting today’s report, but here are five initial takeaways.

Consumers look strong. The New Year greeted households with a one-two punch of higher taxes and rising gas prices, but consumers seem to have shrugged off the hit to their wallets. Consumer spending rose at a 3.2% rate in the first quarter, the best pace since late 2010. Spending rose especially quickly in durable goods, longer-lasting items like cars and dishwashers, and another big jump in the construction sector provided further evidence that the housing market rebound is real. Imports rose too, which detracted from economic growth, but is another sign domestic demand is strong.

Businesses, less so. If the consumer sector gained momentum in the first quarter, businesses lost ground. Spending on equipment and software, a proxy for business investment, rose at a 3% pace, down sharply from 11.8% at the end of 2012. Investment in industrial and transportation equipment actually fell, as did spending on structures like stores and factories. One bright spot: Exports rose, a sign of strength amid a shaky global economy.

Government remains a drag. Falling public-sector spending continued to pull down growth, falling at a 4.1% rate, the ninth decline in the past ten quarters. The drop was concentrated in the federal government, in particular defense, where spending fell at an 11.5% rate. That followed a massive 22.1% pullback in defense spending in the fourth quarter.

Watch the trend. The first quarter’s 2.5% growth rate may have disappointed economists, but it still marks a reasonably healthy growth rate, especially compared to the end of 2012. Economists caution that 2013’s early strength was at least partly a rebound from the artificially low growth rate at the end of 2012 — businesses built inventories very slowly in the fourth quarter, then had to build them back up to start the year. But the slow fourth-quarter inventory number was itself a reaction to an unusually strong build-up in the fall. Average all three quarter together and the economy is growing at a 2% rate.

But worry about the future. The first quarter’s reasonably healthy growth was driven largely by the consumer sector. That could spell trouble going forward. After-tax income fell sharply in the first quarter, meaning consumers had to save less to spend more. That can’t continue forever, especially after the still-shaky job market slowed again in March. Falling gas prices and rising real estate and stock markets should help prop up consumers, but there are already signs that spending slowed in March.

[MrB]

Those in power have different goals than you do.

[Drawn7979]

just what i expected, at least i'm still unemployed right?

[PGR88]

Media and Obama preparing “Boston Terror Attacks” as reason for 2nd Qtr GDP, when it fails to meet expectation.

[griswold3]

http://www.athenaalliance.org/pdf/PolicyonIntangibles-Torino.pdf

Note: See page 3 for list of “Intangibles” to be included in GDP total. This report was from May 2009, so the change has been planned for a while. They know what is going on, and what’s ahead. They just need to cover it up by ‘rewriting history’

[St_Thomas_Aquinas]

—— The economy is “struggling because of deep government spending cuts”??? ———

Insane, stupid, or ignorant?

In most cases, with reporters, I suspect it’s ignorance. I’ve never seen a reporter demonstrate an understanding of basic economic principles.

The other half of the problem is that that THINK they’re knowledgeable. I blame diplomas for this. It’s just like The Wizard of Oz.

[MrB]

More hope for a fool than a man who is wise in his own eyes.

[SkyPilot]

...deep government spending cuts... DEEP?

6% across the board to non-defense, 9% across the board to Defense, which translated to a 13% reduction because it fell in middle of the fiscal year.

Yes, deep. The "2%" cut you hear Sean Hannity spinning is not accurate, because 63% of all spending is on Entitlements, and they are exempt from Sequestration. That means 37% of the rest (non-mandatory spending) took 100% o of the cuts. For Defense, it is much worse - they are 17% of the overall budget, yet they absorb 50% of the cuts by law.

I GUARNANTEE you that is Social Security checks were cut 6% or 9%, people would be SCREAMING that those were deep cuts.

You know that as well.

[SkyPilot]

#1- Have there been real cuts in spending?

There have been REAL CUTS in Defense spending. There were $487 Billion in cuts (over ten years) that started two years ago, and that was before Sequestration kicked in with another $650 Billion in cuts.

Put another way, this is not a baseline budget gimmick for Defense - there are LESS real dollars (much less) in the budget than in previous years.

Again, REAL cuts.

And it is going to get worse for the military (a Constitutional enterprise, by the way).

I cannot speak for other agencies.

[SkyPilot]

See post #38.

[Joe Boucher]

Bush’s fault?
Still?
soooo, let’s spend more money we ain’t got.