BEA: Still no recession

posted at 11:00 am on July 31, 2008 by Ed Morrissey

The Bureau of Economic Analysis produced its second-quarter report, and it will surprise a few of the doom-and-gloom crowd. While certainly not spectacular, it shows that the economy continues to grow, improving on a weak first quarter to bounce up to 1.9% growth. The revised forecast for 2007′s final quarter reveals a retreat:

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 1.9 percent in the second quarter of 2008 (that is, from the first quarter to the second quarter), according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.9 percent. ….

The increase in real GDP in the second quarter primarily reflected positive contributions from
exports, personal consumption expenditures (PCE), nonresidential structures, federal government spending, and state and local government spending that were partly offset by negative contributions from private inventory investment, residential fixed investment, and equipment and software. Imports, which are a subtraction in the calculation of GDP, decreased.

The acceleration in real GDP growth in the second quarter primarily reflected a larger decrease in
imports, an acceleration in exports, a smaller decrease in residential fixed investment, and an
acceleration in PCE that were partly offset by a larger decrease in inventory investment.

The BEA will issue its final look at Q2 at the end of August.  They revised 2007Q4 downwards, showing it as the first quarter of negative GDP movement in at least four years.  The GDP had previously been rated as a positive 0.6%, but now has been calculated at -0.2%.  Overall GDP growth in 2007 went down a full point from 4.8% to 3.8%, still healthy but not as robust as earlier thought.

At the current rate, Q2 is the strongest quarter in the past three, showing growth despite a fuel-price crisis and a housing downturn.  Thanks to a weak dollar, exports increased and the fall in imports accelerated over Q1.  Housing continued to suffer but actually improved over Q1, and despite all of the talk of a recession in the air, consumer spending increased as well.

John McCain lost no time in pointing out how important free-trade policies have been in allowing the American economy to remain resilient through this turbulence:

“Today’s GDP data are a stark reminder of the importance of focusing on the conditions facing American workers and the policies that will get our economy back on track. While growth continues to be disappointing, trade provides one of the few bright spots in an otherwise gloomy economic picture, raising questions about Barack Obama’s policy of economic isolationism.

“The data announced today show that exports grew 9.2%. Absent strong growth in trade, the economy would have turned negative in the second quarter, contracting by 0.52% instead of growing 1.9%. Senator Obama will throw up trade barriers that would seriously hurt American workers, businesses and our economy. When 95% of the world’s consumers live outside our borders, it is crucial that we do everything we can to expand markets for American goods and level the playing field for American businesses and workers.”

It might behoove Republicans, including McCain, to remind voters that issuing hyperbolic, unrealistic statements about the American economy intends to panic Americans into bad policy.  The economy does not need a lot of top-down management, and in fact a great deal of what ails us now originates in government meddling, such as with Fannie Mae and Freddie Mac and mandates on lending practices.

Whatever else this economy might be, it’s not a recession, and it’s improving.


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Comment pages: 1 2

Overall, I agree with you, but I think we have essentially a political problem in our economy, but not necessarily a systemic one. The system works, if we stop using it for social engineering. I think this is what LimeyGeek was trying to make clear.

JiangxiDad on July 31, 2008 at 1:16 PM

You hit the nail home with one blow ;)

LimeyGeek on July 31, 2008 at 1:19 PM

JiangxiDad on July 31, 2008 at 1:16 PM

13,843,825 Millions in GDP, or 13.8 TRILLION….

National Debt is sitting just a bit over 9.5 TRILLION, with close to HALF a Trillion being paid in interest this year.

National debt figures do NOT reflect the Fannie bailout. They do NOT reflect the other bank bailout. They do not reflect the unfunded mandates of Soc Sec, or Medicare.

And from a bit of reading, it appears that abou 40% of the National debt is owed to the Federal Reserve Bank itself… which is interesting.

Romeo13 on July 31, 2008 at 1:52 PM

“In my julep, or on my new potatoes.
LimeyGeek on July 31, 2008 at 1:08 PM

Both of those.
Not so much with the prefix “gov”.

J_Gocht on July 31, 2008 at 1:55 PM

And from a bit of reading, it appears that abou 40% of the National debt is owed to the Federal Reserve Bank itself… which is interesting.

Romeo13 on July 31, 2008 at 1:52 PM

Can you explain how that works?

JiangxiDad on July 31, 2008 at 2:05 PM

“Romeo13 on July 31, 2008 at 1:52 PM

WOW, a trillion here a trillion there, pretty soon you’re talkin’ real money…

We know we’re living off borrowed money how much borrowed time do we have?

It appears we’re replaying a Germany and Japan scenario during and after the “Big One”?

J_Gocht on July 31, 2008 at 2:05 PM

LimeyGeek on July 31, 2008 at 2:08 PM

Proof that we never steer anyone wrong here at HA.

JiangxiDad on July 31, 2008 at 2:11 PM

Can you explain how that works?

JiangxiDad on July 31, 2008 at 2:05 PM

The Federal Reserve Bank is a private institution, with seperate books from the US Government…

Now, when we PAY taxes, it goes to the Fed Reserve Bank. The US Gov borrows money from the Fed Bank to pay for ongoing expenditures, and that account is paid for by tax reciepts.

IF the Gov borrows more from the Fed, than Tax recipts pay off, you have a Budget shortfall…

Now, the Fed Reserve Bank then takes and offers bonds to other banks and countries, to alleviate their portion of the debt… but right now they have only been able to sell about 60% of the debt, and that % seems to be decreasing as the fundamentals of our debt position becomes unsustainable.

Romeo13 on July 31, 2008 at 2:14 PM

Proof that we never steer anyone wrong here at HA.

JiangxiDad on July 31, 2008 at 2:11 PM

I’d also recommend his book “On Classical Economics”

LimeyGeek on July 31, 2008 at 2:16 PM

I don’t care as much about the national debt as I do the deficit.

I don’t want to tackle the deficit by raising taxes. I want the government to start figuring out where they CAN tighten their belt – just as all Americans who have to follow a budget are forced to do.

If they didn’t waste so much money they would have more. Every American knows this. Every American can find waste to cut out. Why can’t Congress? The answer obviously is that they use our money to buy votes for them, but it’s about time for a new Tea party.

ThackerAgency on July 31, 2008 at 2:18 PM

The Federal Reserve Bank is a private institution

You don’t get more incorrect than this.

LimeyGeek on July 31, 2008 at 2:22 PM

ThackerAgency on July 31, 2008 at 2:18 PM

Uh, the THIRD largest expenditure by the Fed Government, right after defense, and Health and Human res, is for INTERST on the National Debt.

Lets see… Deficit? 490 Billion… Interest on National debt? 440 billion through June for the fiscal year…

Our problem IS our debt, and how we handle it.

Romeo13 on July 31, 2008 at 2:24 PM

As a percentage, our national debt is less than or comparable to all of the western nations.

Just another scare tactic to drum up support for higher taxes and Democrats, both of which would make the problem worse, not better.

NoDonkey on July 31, 2008 at 2:28 PM

Romeo13 on July 31, 2008 at 2:14 PM

Any links on your explanation?

JiangxiDad on July 31, 2008 at 2:51 PM

“Whatever else this economy might be, it’s not a recession, and it’s improving.”

If one forgets real inflation, a 19% drop in home sales, and oil still $25 too high for a sound economy, then. yep, its improving….

JIMV on July 31, 2008 at 2:52 PM

I’d also recommend his book “On Classical Economics”

LimeyGeek on July 31, 2008 at 2:16 PM

Thanks. Haven’t read it. Will check it out.

JiangxiDad on July 31, 2008 at 2:53 PM

You don’t get more incorrect than this.

LimeyGeek on July 31, 2008 at 2:22 PM

Uh, you may want to go research this a bit…

The Federal Reserve Bank is just that, a bank. It was created to be the central bank of the government, specificly because Business folks did not trust Politicians to run fiscal policy.

So the created this… (from Wiki)

Federal Reserve Banks

12 regional banks with 25 branches
Each independently incorporated with a 9-member board of directors, with 6 of them elected by the member banks while the remaining 3 are designated by the Board of Governors.
Set discount rate, subject to approval by Board of Governors.
Monitor economy and financial institutions in their districts and provide financial services to the U.S. government and depository institutions

The Fed Board is appointed by the President, and sets Policy… the Fed BANKS are private entities, whose boards are selected from the banking industry itself. The Fed BANKS get to keep 6% profit.

Romeo13 on July 31, 2008 at 2:55 PM

NoDonkey on July 31, 2008 at 2:28 PM

Nope, just a Plea for FISCAL SANITY, and fiscal conservatism…

Romeo13 on July 31, 2008 at 2:56 PM

“they are full because the airlines are cutting flights. – Thack

MY airline has not cut any flights and we’ve been full the whole time. We do get some first timers on SW who used to fly the other guys, I know this because they ask where their seat number is. haha”

Before we all get to thrilled, are we not sort of forgetting the massive (over 10%) in flights announced over the last six months. You can cram fewer folk into fewer flights and still fill them.

JIMV on July 31, 2008 at 3:05 PM

As a percentage, our national debt is less than or comparable to all of the western nations.

That’s the worst argument of all time. Should we start importing more Muslims to catch up with France also?

You’re glossing over the real impact of the high debt and annual deficits. There’s no money for more important things- such as giving people a way to afford health insurance. For the cost of several year’s debt, we could replace all fossil fuel production of electricity with solar and wind, and then start moving all our heavy transport to natural gas. Not only would that dramatically help the economy, it would stop the massive wealth transfer to the Middle East.

But no… we have to give seniors free meds while subsidizing the drug industry. We fight foreign wars and ask only soldiers to make sacrifices- for the rest of us, it’s free. Under Bush, the super wealthy who have really won big time. No real estate slow down is occurring in upper Manhattan. Go there and you’ll see why people call it another guilded age.

And at what cost to the nation? Social security and Medicare nightmares are over the horizon- no one is questioning that fact. As Warren Buffet said, solve the deficit problem and the entitlement issues are manageable.

bayam on July 31, 2008 at 3:12 PM

Romeo13 on July 31, 2008 at 2:55 PM

Your ‘wiki’ source is wrong.

The Fed Reserve is a central government institution that shares issuance duties with the US Treasury. The 12 regional reserve banks are likewise federally-owned, and act literally as regional arms of the Fed Reserve.

Private banks subscribe to the various regional Fed Reserve banks, and are bound by piles of red tape to abide by federal regulation with respect to holdings and interest.

These private banks get the opportunity to vote for members of their regional bank’s board of directors – providing for feedback and balance regarding fiscal policy – and the POTUS gets to appoint members of the Fed Reserve board of governors.

The overall banking structure in the US is a [supposedly balanced] public-private affair, however, the Federal Reserve system is absolutely public, and part of the US government infrastructure.

LimeyGeek on July 31, 2008 at 3:14 PM

There’s no money for more important things- such as giving people a way to afford health insurance. For the cost of several year’s debt, we could replace all fossil fuel production of electricity with solar and wind, and then start moving all our heavy transport to natural gas.

I want a unicorn.

LimeyGeek on July 31, 2008 at 3:15 PM

LimeyGeek on July 31, 2008 at 3:14 PM

Question, are Fed Res Bank employees considered Federal Government employees? uh… no…

Is there budget mandated by Congress? no…

Is there anyplace in the Constitution or any founding document that talks about a federal bank? no…

Are all Fed bank Board Members appointed by the Government? No.

Is ANY of the three mandated branchs of government in control of the Fed Bank? no…

The 12 regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations. The Reserve Banks whether it is Federal Reserve Bank of Chicago, Federal Reserve Bank of St. Louis, Federal Reserve Bank of Boston or any other state Federal Reserve Bank are not operated for profit, and ownership of a certain amount of stock by a “member bank” is, by law, a condition of membership in the system

from: http://www.bankinginfoguide.com/federal-reserve-bank.html

So, lets recap. STOCK is held by member banks. 6 of 9 BOARD Members are selected by member banks. They are incorporated as PRIVATE institutions, while being overscene by the Government Appointed Fed Res Board. Neither the President, nor Congress, can dictate policy to the Fed… but can only ask for “explanation” and potentialy fire the Head of the Board…

If it walks like a duck, and quacks like a duck…

Romeo13 on July 31, 2008 at 3:55 PM

“19% drop in home sales”

Because people refuse to accept the fact that they’re asking too much for their houses.

I bought mine in 2001 and it more than doubled in value, according to what I could have sold it for in 2005.

So what? I’ll sell it for double. How much did I lose?

And I’m going to wait until the price comes down on the houses I really need.

NoDonkey on July 31, 2008 at 4:00 PM

Then again, it’s amazing that people seem to have no idea how much tax money will be spent on bailing out the financial system over the next 5 years. Freddie and Fannie acted with incredible incompetence and have essentially been nationalized to prevent their collapse, while Congress refuses to pass the type of reform that will prevent the same problems from occurring again at those lenders. Voters don’t seem to care though.

bayam on July 31, 2008 at 11:45 AM

I think this is what astronomers call a Black Hole.

Geologists call it the tip of an Iceberg.

MB4 on July 31, 2008 at 4:20 PM

We fight foreign wars and ask only soldiers to make sacrifices- for the rest of us, it’s free.

bayam on July 31, 2008 at 3:12 PM

Aah, the soldiers probably don’t like shopping that much anyhow.

MB4 on July 31, 2008 at 4:23 PM

NoDonkey on July 31, 2008 at 4:00 PM

You know I think the home sales are dropping because people are tired of the inflated BS with them.

I am in the process of buying a Condo right now. The City has it as 179,900, the assesment was 160K I got it (without a bid war) for 159,900. It isn’t a small condo either 1689 sq ft, which is almost the normal house size, 2.5 baths and 2 fireplaces (no I am not going to turn them gas either… that is a waste of money). The original price was 189,900.

So with what I am going through and buying now, I think people have just had it with prices and are slacking off and waiting for the owners to cave. Screw the owners… there is NO reason why I should pay out the world prices for a house, condo, duplex, townhouse etc when I do not see the reason behind it. I will pay fair market value… that is it.

upinak on July 31, 2008 at 4:23 PM

Ben Stein and other televised economists resoundingly agree there is no recession.

maverick muse on July 31, 2008 at 4:37 PM

upinak

Realtors advise that the low purchase price makes a home the great buy, not what it sells for after inflation at some future day and time.

maverick muse on July 31, 2008 at 4:39 PM

upinak

Realtors advise that the low purchase price makes a home the great buy, not what it sells for after inflation at some future day and time.

maverick muse on July 31, 2008 at 4:39 PM

not this place. I am in an Aea which most of the homes and condos got for minimum of 250K and the highest is 1.5 million and I am in the oldest condo’s around there and they are the smallest as well.

The market up here sucks. You can’t buy anything for less then 240, and that is a ranch, 2 bdrm, 1 bath without anything else and you usually have to buy new appliances, as no one leaves them much anymore. I got lucky as it was an older couple who were tired of it and renting it out was becoming troublesome.

The reality business here has gotten as bad as the politicians. And that is me putting it nicely.

upinak on July 31, 2008 at 4:44 PM

the assesment was 160K I got it (without a bid war) for 159,900

LOL Who gets into a bidding war over $100? ;)

Reminds me of a scene in “Bad Santa” where they’re haggling over the division of loot….

LimeyGeek on July 31, 2008 at 4:52 PM

Maveraick, more or less I am tired of paying for stuff that isn’t worth that much. Clothing also comes to mind.

upinak on July 31, 2008 at 4:54 PM

LimeyGeek on July 31, 2008 at 4:52 PM

I got into a bidding war over 50 dollars on a house. A repo that needed some serious fixing.

It went for 130, and I big 100,900 and someone under bid me by 50 dollars. I uped it to 105K and they did the 50 dollar underbidding again. I just said screw it and pulled it. The guy that got it is now regreting it… the pipes froze and blew and the mold in the house is so bad it is concidered a health hazard. Glad I never got it.

upinak on July 31, 2008 at 4:57 PM

Romeo13 on July 31, 2008 at 3:55 PM

I suggest reviewing the ‘official’ site at http://www.federalreserveonline.org/

It is a curious beast, but the only private organizations are the member banks – the entire Federal Reserve infrastructure (Fed Reserve + 12 regional banks) itself is a public entity. The relationship between it, government and the private sector is a peculiar one. Understanding the furore surrounding the Aldrich Plan and the Fed Reserve Act sheds some light on how this structure evolved.

LimeyGeek on July 31, 2008 at 5:04 PM

upinak on July 31, 2008 at 4:57 PM

I’m jus’ funnin’ ;) Glad you came out on top.

LimeyGeek on July 31, 2008 at 5:05 PM

LimeyGeek on July 31, 2008 at 5:05 PM

I had no clue that buying a house would be this unnerving. First house I might add. On top of that I am buiding a cabin, not including the jobs I am working. I need a massage… sighs.

upinak on July 31, 2008 at 5:19 PM

I want a unicorn.

And thats what you said when they talked about putting a man on the moon. Some people just can’t see a future beyond oil. The same breed that couldn’t have imagined laptop computers 25 years ago.

bayam on July 31, 2008 at 5:19 PM

Yet another attempt at a wake-up call:

“Unthinkable Truth, Undeniable Reality”

http://www.moneyandmarkets.com/Issues.aspx?Unthinkable-Truth-Undeniable-Reality-2024

Both parties are to blame. But Harry Truman was right, so George Bush is going to get the blame.

He’s sitting where the buck stops.

olddeadmeat on July 31, 2008 at 5:35 PM

bayam on July 31, 2008 at 5:19 PM

Does it come in pink?

LimeyGeek on July 31, 2008 at 5:35 PM

LimeyGeek on July 31, 2008 at 5:04 PM

I’d already read that, some time ago.

My contention is that it has evolved into somthing OUTSIDE of effective government control, or even real oversite. Is it a “public” institution? Sort of… is it a governmental institution? Not really…. although it does hold our economy in its power. Does it make its own rules? Yes.

And the biggest question, which just hit me… if they are the entity which oversees the Loan industry, as it seems their mandate reads… are THEY the ones responsible for the mess we find the banking industry?

Romeo13 on July 31, 2008 at 5:36 PM

are THEY the ones responsible for the mess we find the banking industry?

Partly. Their low interest rates enabled bad gubmint policy to take far greater hold in the banking industry.

But fundamentally, congress is the turd in the punchbowl.

LimeyGeek on July 31, 2008 at 5:44 PM

LimeyGeek on July 31, 2008 at 5:44 PM

Actualy, the more I look at it, its the FED who makes rules about banking and loans. Congress is supposed to oversea them, but they do not make the rules.

In fact, the much touted Congress proposed “truth in lending” thing just passed the FED board as a RULE….

Its the FED who oversees the member banks who are failing, and suddenly need BILLIONs in bailouts… but its interesting that no one is blaming the FED….

Fannie and Freddie? oversite by the FED, not the Congress…

Hmmmmm… may have to dig a bit more…

Romeo13 on July 31, 2008 at 5:56 PM

Fewer people producing more goods overall with the aid of modern technology will continue to shrink the job market. This will take place at all levels of employment. So if the economy is growing while the number of people participating in the economy is shrinking what should we call it besides “a problem”?

{^_^}

herself on August 1, 2008 at 10:23 AM

“You know I think the home sales are dropping because people are tired of the inflated BS with them.”

Definitely.

I live in the DC area and there are people who homes are assessed at four times what they paid for them.

So I’m supposed to cry a river for them because they can’t get that today? Because their houses are worth three times what they paid? Please.

This goes along with a Washington Post sob story on a 23 year old woman who bought a $20,000 used car with a one-year warranty. She wanted to look cool on the weekends.

She looked real cool when the engine blew after the warranty expired and she couldn’t afford to repair it. So she defaulted on the loan.

But she was portrayed as someone we’re supposed to feel sympathy for. I bought a car for $300 for cash at 23 and it lasted longer than a year. I have no sympathy for someone stupid enough to buy a $20K car they cannot afford to repair.

NoDonkey on August 2, 2008 at 1:37 PM

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