Q3 GDP revised sharply downward — again
posted at 9:30 am on December 22, 2009 by Ed Morrissey
Almost two months ago, the Commerce Department cheered the announcement that the third quarter GDP had grown at an annualized rate of 3.5%. The Obama administration hailed it as a sign that their economic policies had spurred real growth. Even when Commerce sharply revised the number downward a month later to 2.8%, the White House continued to argue that the lower number still meant that the US had turned the corner, even after a number of critics asked how Commerce could have missed the number so widely.
Today, Commerce backtracked even further. The annualized growth number for Q3 turns out to have been 2.2%, a revision of over a third from its original estimate two months ago:
The U.S. economy grew at a much slower pace than initially thought in the third quarter, restrained by weak business investment and a slightly more aggressive liquidation of inventories, according to data on Tuesday.
The Commerce Department’s final estimate showed gross domestic product grew at a 2.2 percent annual rate instead of the 2.8 percent pace it reported last month. Analysts polled by Reuters had forecast the report to show GDP, which measures total goods and services output within U.S. borders, unrevised at a 2.8 percent growth rate in the third quarter. …
Growth was boosted by government stimulus programs, including the popular cash for clunkers and tax credit for first-time home buyers, and debate continues to rage over the sustainability of the recovery once government support wanes.
No kidding. The Cash for Clunkers program and the first-time homebuyer tax credit was estimated to have contributed as much as half of the original Commerce estimate of 3.5%. Assuming that to still have contributed at least 1.5% of the final GDP, that leaves a rather pathetic 0.7% growth in Q3 without it. It’s barely a recovery at that level.
What changed? Commerce revised some other base numbers. Business investment, a key indicator of recovery, fell 5.9% instead of the previously reported 4.1%. Nonresidential construction was worse than first thought, which shows how much that tax credit impacted the residential construction market. Even the good news wasn’t quite as good as first thought. Consumer spending rose 2.8% instead of 2.9%, much of that from the Clunkers program and the tax credit.
The third-quarter growth looks a lot more anemic than advertised by the Obama administration, especially when one considers the gimmicks that temporarily boosted its performance. Most troubling is Commerce’s poor performance in analyzing economic conditions. If they’re so incompetent as to miss this figure by 37% (1.3 from 3.5 is slightly over 37%), then clearly they need some fresh talent. If they got pressured into stating overly cheerful numbers, it’s something else entirely. That would be something Congress should investigate … if we had an independent Congress at all.
Blowback
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Unexpectedly.
hoosiermama on December 22, 2009 at 9:32 AM
Save us Senator Government, save us!
artist on December 22, 2009 at 9:32 AM
yes we are down to 2.2% and I STILL call for a double dip from here
feel the Obamanomic Burn!
ginaswo on December 22, 2009 at 9:32 AM
Looks like he inherited that B+…
right2bright on December 22, 2009 at 9:33 AM
From top to bottom, starting with 0.
OmahaConservative on December 22, 2009 at 9:33 AM
Data from tree rings, perhaps?
Geochelone on December 22, 2009 at 9:33 AM
More state spending is the obvious solution.
Track-A-'Crat on December 22, 2009 at 9:33 AM
Oh, I can’t wait for the fourth quarter digits. With retail sales way down this year compared to last, there is no place to go but lower.
madmonkphotog on December 22, 2009 at 9:36 AM
Unprecedented, I say.
Enoxo on December 22, 2009 at 9:36 AM
Or as Governor Palin said…
BOOM! Taste my nightstick.
Enoxo on December 22, 2009 at 9:36 AM
Beat me to it
NoFanofLibs on December 22, 2009 at 9:37 AM
That’s okay, the news readers are still just giddy over the the uptick.
Cindy Munford on December 22, 2009 at 9:37 AM
My vote goes to Commerce being pressured. It’s a Chicago thing. Actually it’s a Soviet thing, too.
Kissmygrits on December 22, 2009 at 9:37 AM
Simple explanation.
The government doesn’t create jobs.
It is supposed to provide an encouraging climate for business to grow.
Every business out there either can’t borrow money, is afraid to, or is afraid to spend any money they have in fear of the latest power grab by Obama and Company.
Obama’s Presidency is like a blindfolded crack-head standing in a crowded room spinning around with a loaded pistol in each hand.
cntrlfrk on December 22, 2009 at 9:37 AM
I’ll help some of our friends out. From this archived article GDP in 3rd quarter rises to 3.5%; Update: Initial jobless claims steady
Gobama!
Bleeds Blue on October 29, 2009 at 10:15 AM
CBP on December 22, 2009 at 9:37 AM
I don’t know all the details about the economy, but it sounds as if the GDP is acting stupidly…
JamesLee on December 22, 2009 at 9:37 AM
Did the Commerce Department use global warming scientists to figure the original numbers?
darwin on December 22, 2009 at 9:38 AM
More of this “unexpected” BS again.
I assume they are expecting unicorns pulling carts down the streets with Smurfs tossing Obamamoney and carbon credits to the adulating unter-people……..???
JoeinTX on December 22, 2009 at 9:38 AM
We’re obviously not mining enough Unobtanium.
Fletch54 on December 22, 2009 at 9:39 AM
I’m shocked! Shocked! I Tell you! If Obie considers this a B+ then I would hate to see a D. I don’t think the country can stand it.
Dire Straits on December 22, 2009 at 9:39 AM
My recollection is that previous recoveries had quarterly growth figures in the 6% range.
Mark1971 on December 22, 2009 at 9:39 AM
Come on people…
The reported 3.5% LIED ABOUT ON PURPOSE.
The markets have been wildly manipulated this entire year with fraudlent numbers and outright lying about recovery.
Thing is, it works. We are in a depression but the constant manipulation and lying makes it appear otherwise.
LordMaximus on December 22, 2009 at 9:40 AM
I cannot believe that Judd Gregg was ever even considering being a part of Obama’s Commerce Department.
myrenovations on December 22, 2009 at 9:40 AM
My calculator shows…
2.2% : 3.5% – an overstatement of 60%
and,
2.2% : 2.8% – an overstatement of 27%
franksalterego on December 22, 2009 at 9:40 AM
I notice too that the downward (as in death spiral) reporting is dumped at a convenient time for it to be buried amid all the glee over state-seizure of healthcare, the holidays, etc.
highhopes on December 22, 2009 at 9:40 AM
I think it’s worse. When calculating percent error, it’s the wrong value – true, all divided by true. In other words, (3.5 – 2.2) / 2.2 * 100%, or 59%.
Of course, this assumes the 2.2% is the “true” value.
LastRick on December 22, 2009 at 9:41 AM
But but but Obama’s now a “deficit hawk” or something!
See? Problem solved!
MORE STIMULUS AND TAXES!
Good Lt on December 22, 2009 at 9:41 AM
This surprises no one, not even the left for they don’t give a damn. What now, windfall taxes on those who purchase.
How many jobs did bambi save last week? Let’s go back to Copenhagen and pledge more money we do not have until we can devise a way to share more wealth. Comrade bambi has not only lost his wings he’s lost his damn mind!!!
Next revision…….. Retail sales not a brisk as reported…
bluegrass on December 22, 2009 at 9:41 AM
Obama’s “management of the economy” = A-
Good Lt on December 22, 2009 at 9:42 AM
Lies, lies and more lies.
Can’t wait to see how far they will go to manipulate the numbers come September/October of 2010.
These people don’t cook the books, they incinerate them.
fogw on December 22, 2009 at 9:43 AM
Cybergeezer on December 22, 2009 at 9:43 AM
Ahhhhh, the warmth and comfort of fuzzy math. Beats the holy sh!t out of the snuggie!
milwife88 on December 22, 2009 at 9:44 AM
To be fair the first estimate is exactly that, an estimate. I believe it’s something like only 40% of total data is in by that point and mostly from the first half of the quarter. July and early August represent the period when most of the stimulus was in effect (which admittedly should have been adjusted for). Also, from reports around the world, most economies began to weaken again near the end of the 3rd quarter, which wouldn’t have been in the first estimate by the Commerce Deptartment. Even then, this number will be revised several more times over the next decade.
jarodea on December 22, 2009 at 9:44 AM
Crank up the printing press, we need more Obama Stash
bluegrass on December 22, 2009 at 9:45 AM
What surprises me, is not their incompetence with numbers but the total decline of retail sales over the Christmas season. I don’t know what the actual number will show but last night a retail establishment I was at was like a ghost town.
ORconservative on December 22, 2009 at 9:45 AM
Damn you’re good…. don’t think we’ll be hearing much of a retraction from that snarky ass troll.
bloviator on December 22, 2009 at 9:46 AM
Keep f*cking that chicken.
uknowmorethanme on December 22, 2009 at 9:46 AM
In addition, these kinds of revisions are nothing new.
jarodea on December 22, 2009 at 9:46 AM
U.S. to Factor “Obama’s Sweetness” Into GDP Calculations http://optoons.blogspot.com/2009/09/us-to-factor-obamas-sweetness-into-gdp.html
Mervis Winter on December 22, 2009 at 9:48 AM
when did corzine get to the white house?
MFn G I M P on December 22, 2009 at 9:48 AM
I agree; other administrations have revised the numbers as well. What warrants a further look though may be the magnitude of their error — 60?!? How do you miss by that much? One would think there’s a standard formula for this kind of estimation — input how many of X were sold, bank rates, etc. — out pops “growth”. I have a gut feeling this administration is just winging it.
LastRick on December 22, 2009 at 9:49 AM
Oh yeah. They’ll pitch it as “but this was still the quarter in which the economy turned around.”
They should be saying, “so now the government has been wrong on its analysis of the economy TWICE for this quarter. And now a look at government’s plans for health care…”
hawksruleva on December 22, 2009 at 9:49 AM
ORcon, I was thinking the same thing last night, doing my last moment shopping like I swear I will never do again.
Big shopping area here, three strip malls, WalMart and Sam’s, regular mall, with stores like Best Buy, Dicks, B&N, Bed Bath and Beyond, etc, all within about a one mile stretch. Usually, this time of year you have to wait about 2-3 cycles at each light, and cruise parking lots forever to find something in the same county. Not so this year. Either there’s a helluva lot more online shopping, or people just aren’t.
JamesLee on December 22, 2009 at 9:49 AM
Got an e-mail from one of my clients yesterday, informing me that they were ceasing operations. We had worked together for many years, and they weathered the 2007-2008 economic storm with no problems. Then O’bama took over.
One of the main factors they gave for going out of business? “Government interference”.
Del Dolemonte on December 22, 2009 at 9:50 AM
This is terrible news. Only government can save us now.
LibTired on December 22, 2009 at 9:50 AM
It’s actually worse since private inventory growth and government spending added 1.3% to GDP, that means the real underlying functioning economy shrank in the Q3.
jarodea on December 22, 2009 at 9:51 AM
Another quote from the same article.
`
Obama’s been in office for about a year. At least the GDP went was positive in the 3rd quarter, but it is pretty anemic considering the amount of “Stimulus” thrown at it and our ever growing debt.
CBP on December 22, 2009 at 9:52 AM
They’re still learning all the tricks to “hide the decline.”
AZCoyote on December 22, 2009 at 9:52 AM
If they can’t do better at “hiding the decline”, they ought to call in the professionals: Phil Jones and his good buds at East Anglia CRU
ya2daup on December 22, 2009 at 9:52 AM
but the crease in his pants!! /brooks
aikidoka on December 22, 2009 at 9:53 AM
Well obviously you don’t understand how to “homoginize”. If you did you would understand how all of this stuff works. It’s all settled by peer reviewed economy scientists.
/
Johnnyreb on December 22, 2009 at 9:54 AM
Stimulus package failure? Check.
Cash for Clunkers failure? Check
Mortgage Assistance failure? Check
Health care overhaul failure? In progress
Obama Presidency? Good, solid B+.
Enoxo on December 22, 2009 at 9:54 AM
What do you expect from a person who can’t or won’t ( your pleasure ) produce his birth certificate or his grades and transcripts from his college years. Perhaps there was much more than the stated experimentation…………
bluegrass on December 22, 2009 at 9:54 AM
This is Obama, so the standard formula doesn’t apply. I wouldn’t be surprised if they assumed a multiplier from government spending, even though government spending tends to have less dollar-for-dollar impact than non-government spending. That’s how they calculated “jobs created or saved”, after all. We spent X, and assume that a job is created for every Y we spend. X/Y = number of jobs.
What the Left doesn’t get is that the economy, like the climate, is too complex to explain with a formula or computer model.
hawksruleva on December 22, 2009 at 9:55 AM
hey, i’m not an economist. my husband reads the WSJ religiously but that newspaper just makes me go cross-eyed.
but I can ride around here in rural Virginia–very depressed. then I can ride into Richmond & I see things much slower than 2 years ago.
this is just riding from point A to point B.
if I can see this, why can’t the brilliant braintrust of the Obambi Administration?
kelley in virginia on December 22, 2009 at 9:56 AM
But Jethro has a fifth grade education you know…
mmmmm mmmmm mmmmm
bluegrass on December 22, 2009 at 9:56 AM
Bernie Madoff would be proud of this explanation.
Rovin on December 22, 2009 at 9:57 AM
The problem with the measuring of GDP is it includes three primary factors CGI – Consumer, Government, and Investment.
But Government spending is a drain on the economy. The effect of the drain is delayed, by some months or even years, as the costs of the spending cause less investment and less consumer spending due to the higher taxes, higher interest payments costs, and the effects of inflation caused by excess printing of money.
Dasher on December 22, 2009 at 9:58 AM
The better way to look at it is by percentage points. For example, the British initially estimated their GDP contracted by 1.6%, then reduced it to 0.8%. Were they off by 100%? Or were they off by 0.8 points? Thus far Commerce was off 1.3 points.
As far as how much they missed, they first estimated activity was 103.5*Q2 and now are saying 102.2*Q2. That’s not that bad. They could probably do different things to correct it, but they’re all ultimately fudge factors and any will be off just as much for the most part (just at different times).
I’m not so sure this revision is unprecedented, but it does seem high and appears to be due to the effect of the stimulus in the early months being overstated and the later import surge being understated. The shrinkage of the underlying functioning economy has changed much (though I’m very much in IIRC territory for what it was originally).
jarodea on December 22, 2009 at 9:59 AM
So whats the game here?
Play with the numbers to justify another Porkulus?
This is Insanity folks.
Juno77 on December 22, 2009 at 9:59 AM
Help us ObowOneCan’tObey, you’re our only hope.
Kafir on December 22, 2009 at 10:00 AM
Listen up, people.
ANY increase in the GDP is entirely the result of runaway government spending.
Boy, I can hardly wait for double digit inflation.
On a side note, will there be a conservative who would even want the job after this clown gets done destroying the country? It may be like you and a filthy bum fighting over the last donut. The bum coughs on it and says “Still want it?”
Lanceman on December 22, 2009 at 10:01 AM
Blleds Blue is just a garden tool. Once the manure is spread around, he is easily discarded.
jbh45 on December 22, 2009 at 10:02 AM
Worst case scenario…
Suppose, they’re Understating the cost of their Health Care Bill by the same sort of numbers used to Overstate the GDP?
Shudder
franksalterego on December 22, 2009 at 10:02 AM
Because you are looking externally and the filthy lying coward in the White House listens to a very small cadre which are an echo chamber of his Chicago brand thuggery.
highhopes on December 22, 2009 at 10:02 AM
Is it? Gold prices are wayyyyy up, as are most other precious metals. Those folks are betting that times will get worse. The stock market is advancing as people try to pick the winners in a field littered with losers. Banks have taken their eye off of profit or customer satisfaction while they scramble to repay TARP. State economies around the nation are teetering on the edge of bankruptcy; even fiscally responsible states like Virginia are facing big deficits.
hawksruleva on December 22, 2009 at 10:03 AM
And a double-naught spy.
Lanceman on December 22, 2009 at 10:03 AM
It’s worse than you think. Economists estimated that all stimulus in total added 3 to 3.5% to the third quarter GDP. That means without government spending, GDP last quarter was negative.
http://2.bp.blogspot.com/_pMscxxELHEg/SupX7S84btI/AAAAAAAAGro/OnS4wrIS0E8/s1600-h/StimulusZandi.jpg
John9400 on December 22, 2009 at 10:04 AM
Let’s run with this.
3.5, compared to 2.2, is an overstatement of 59.1%. On the other hand, we have to lower the 3.5 by 37.1% to get to the final growth figure.
If a B+ is equal to an 88, and that is overstated by 59.1%, then President Toonces’ final, adjusted grade, would have to be lowered by 37.1%, giving us a final score of 55.
55 = F
MNHawk on December 22, 2009 at 10:05 AM
Now it is time to trot out Joe Biden to calm everyone down. I can’t wait for this.
Dire Straits on December 22, 2009 at 10:07 AM
China said yesterday that the world is running out of money to loan to the U.S. How long before they start being even more agressive in their statements? I suppose we should be happy that they’re teetering on the cliff with us. But how long can we ignore the advice of our main creditor? At some point, the people who really have the money (China) will snap the leash.
hawksruleva on December 22, 2009 at 10:07 AM
This is quarterly growth so it’s comparing things to last quarter, not to 2 years ago. Yes, things are still worse than 2 years ago, GDP in the 3rd quarter of 2009 was $14.24 trillion, in the 3rd quarter of 2007 it was $14.68 trillion or a real decline of 3%. Given most of the increase was government spending, car sales, and inventory build up you wouldn’t see much evidence of that driving around rural VA.
jarodea on December 22, 2009 at 10:07 AM
Brilliance is a truly hard thing to explain but a con man always needs a sucker to bring home the bacon
William Shakesh*t
bluegrass on December 22, 2009 at 10:08 AM
Wrong Formula: All of the GDP numbers are annualized. That is if the GDP expanded like the estimate of Q3 of 3.5 percent for a full year it would result in a 3.5 percent GDP increase. So the new number of 2.2 percent really means a 0.55 percent increase in Q3.On an economy of $14 Trillion a 2.2 percent increase for the year would be $308 Billion… which is less than 1/2 of the amount of the Stimulus spending. Which more or less proves that Government spending does not help. Especially when it is done on borrowed money.
Dasher on December 22, 2009 at 10:09 AM
So we borrowed 1 trillion from China to get an increase of GDP at 2%
So are we still 10% lower than GDP during Bush administration?
seven on December 22, 2009 at 10:11 AM
Uh, let me be clear
we’re in big trouble
gordo on December 22, 2009 at 10:12 AM
…and we should believe this latest number why?
Bugler on December 22, 2009 at 10:12 AM
Do I hear 1.8%?
steveegg on December 22, 2009 at 10:13 AM
China hasn’t net purchased US treasuries in about 6 months and even if they did would represent only 3-5% of total treasuries purchased right now. The Chinese statement is due to their fear that their trade surplus, especially with the US, is about to shrink decisively. That’s the source of their money to buy treasuries. They know they need to widen their trade surplus even more if all the factories they’re building with printed money to gin up economic “growth” are to have customers.
So they threaten the US with one consequence, no more Chinese purchases of US treasuries. Ultimately though we’ll be hitting the printing presses hard this year anyways, and the Chinese ability in 2010 to buy our debt is nothing more than a rounding error for Bernanke’s printing press anyways.
jarodea on December 22, 2009 at 10:13 AM
Good Solid B+
Hey Lefties,
How is Smart Economics working out for you?
antisocial on December 22, 2009 at 10:13 AM
Here’s a piece of insight:
Is it too late to say this now?
Lanceman on December 22, 2009 at 10:14 AM
Correct, and I should have caught that since I looked at quarterly growth numbers to get the Q3 07 and 09 numbers for kelley in virginia and saw the 0.55% growth for Q3. So yeah, they estimated 100.875 instead of 100.55. Either way they weren’t far off.
jarodea on December 22, 2009 at 10:15 AM
Having spent a little time working for the Federal government in statistics, I can tell you from personal experience that the cliche “lies, damned lies and statistics’ isn’t a cliche, its standard operating procedure.
turfmann on December 22, 2009 at 10:15 AM
Yes but,
5.1% : 60% (rounding up) is an error of only 1.76%
P’haps, I could apply for a job in the Dept. of Labor.
franksalterego on December 22, 2009 at 10:16 AM
Math is over rated. Everyone knows Zero and his admin have their own math. You guys with facts just don’t know how it all works. Now let me go turn on the lame stream meadia and see what they say,, Oh wait. Forget waiting they’ll never report this. OK carry on.
Brat4life on December 22, 2009 at 10:17 AM
That was there last number to be released. From now on they will be looking at Q4 numbers.
Dasher on December 22, 2009 at 10:17 AM
Worse, the third-quarter improvement is only $77 billion ($14 trillion x 0.55% growth in Q3). Since the private-sector economists are saying that the effects of the various Porkulus items end when the subsidies end, they cannot be annualized.
steveegg on December 22, 2009 at 10:20 AM
MM could not have chosen a better title for her book.
BKeyser on December 22, 2009 at 10:21 AM
It’s good though that we’re getting these numbers now, two months after they would have been helpful.
I am thankful though the we are still getting these numbers and simply not Newspeak from the admin…
catmman on December 22, 2009 at 10:23 AM
More like ~$20 billion, total economic activity in the 3rd quarter increased from $3,541 billion in the second quarter to $3,561 in the third.
jarodea on December 22, 2009 at 10:24 AM
Seems to be a trend here… When Dubya was president, the GDP and employment numbers were consistently revised UPWARD… Now that Barry is ‘in charge’ the numbers are always revised DOWNWARD… No bias within the government to see here… go back to your homes (if you still have one)
phreshone on December 22, 2009 at 10:30 AM
Green shoots! Green shoots! All over! Just watch! Hahahahahahaha!!!!!!!! On another note, Feinstein gets whole areas of the Mojave put off limits to solar power. So much for Arnie’s “Greening” of California.
Hello 3rd World, here we come!
GarandFan on December 22, 2009 at 10:33 AM
As my Uncle Joe used to say: “Figures don’t lie. But liars sure can figure.”
If this had happened under Bush or even Clinton the press would have been all over them with the numbers asking for them to be explained, after such a sharp revision downward. Any bets on that happening with the current WH occupant?
ajacksonian on December 22, 2009 at 10:37 AM
Now how did I screw up that math?
steveegg on December 22, 2009 at 10:38 AM
And that increase is actualy LESS than the increase to either the National Debt, or the Total US Gov Spending…
Just using GDP is a horrible way to measure an Economy.
Romeo13 on December 22, 2009 at 10:48 AM
Uncle Jed says I’m real good with ciphering…..
mmmmm mmmmm mmmmm
bluegrass on December 22, 2009 at 10:49 AM
The same way I did a few posts earlier :P.
jarodea on December 22, 2009 at 10:51 AM
It’s a numbers wave
J_Crater on December 22, 2009 at 10:52 AM
?
burt on December 22, 2009 at 10:55 AM
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