Final Q2 GDP number comes in at 1.3%

posted at 9:25 am on September 29, 2011 by Ed Morrissey

The Commerce Department released the final revision to its estimate of second-quarter growth this morning, and the GDP figure returned to the first estimate from July.  The revision back to 1.3% certainly looks better than the second pass’ 1.0%, but it’s not going to convince anyone that the economy has caught fire:

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 “third” estimate released by the Bureau of Economic Analysis.  In the first quarter, real GDP increased 0.4 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month.  In the second estimate, the increase in real GDP was 1.0 percent (see “Revisions” on page 3).

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

The acceleration in real GDP in the second quarter primarily reflected a deceleration in imports, an upturn in federal government spending, and an acceleration in nonresidential fixed investment that were partly offset by a deceleration in PCE, a downturn in private inventory investment, and a deceleration in exports.

Final sales of computers added 0.07 percentage point to the second-quarter change in real GDP after adding 0.08 percentage point to the first-quarter change.  Motor vehicle output subtracted 0.10 percentage point from the second-quarter change in real GDP after adding 1.08 percentage points to the first-quarter change.

The report contains slightly better news on real final sales of domestic product, which eliminates inventory adjustments and focuses on actual sales.  That figure rose 1.6% over Q1, which had only increased 0.1% over 2010Q4.  That indicates more actual growth, although 1.6% is still an anemic growth figure.

Reuters gives a glass-half-full report on the new numbers:

There is cautious optimism the economy will skirt another downturn as factory output continues to expand, although at a slower pace than earlier in the recovery, and businesses maintain their appetite for spending on capital goods.

Details of the GDP revisions also were consistent with an economy that is on a slow growth track rather than sliding back into recession.

Consumer spending growth was revised up to a 0.7 percent rate from 0.4 percent. The increase in spending, which accounts for more than two-thirds of U.S. economic activity, was still the smallest since the fourth quarter of 2009.

Export growth was stronger than previously estimated, rising at a 3.6 percent rate instead of 3.1 percent. Imports increased at a 1.4 percent rate rather than 1.9 percent.

That left a smaller trade deficit, and trade contributed 0.24 percentage point to GDP growth.

Well, it’s an improvement over Q1 to be sure, but it’s hardly going to build confidence in the economy, either.  If factory output stays at a “slower pace than earlier in the recovery,” that’s a recipe for stagnation, not a burst of economic growth.  It makes this the New Normal, along with 9% unemployment and a staggering housing market.

Another economic indicator indicated better news — so much so that it looks curiously like an outlier:

In the week ending September 24, the advance figure for seasonally adjusted initial claims was 391,000, a decrease of 37,000 from the previous week’s revised figure of 428,000. The 4-week moving average was 417,000, a decrease of 5,250 from the previous week’s revised average of 422,250.

The advance seasonally adjusted insured unemployment rate was 3.0 percent for the week ending September 17, unchanged from the prior week’s unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending September 17 was 3,729,000, a decrease of 20,000 from the preceding week’s revised level of 3,749,000. The 4-week moving average was 3,743,000, a decrease of 4,500 from the preceding week’s revised average of 3,747,500.

That would be great news, except that there is no real correlation between this and any sudden burst of economic activity.  Reuters notes that the Department of Labor isn’t exactly confident in its report, emphasis mine:

New claims for jobless benefits fell sharply last week to their lowest level since April although a Labor Department official said government statisticians had problems seasonally adjusting the data.

Expect this number to get revised upward next week.  Sharply.

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These reports are racist

faraway on September 29, 2011 at 9:29 AM

Well, it’s an improvement over Q1 to be sure, but it’s hardly going to build confidence in the economy, either. If factory output stays at a “slower pace than earlier in the recovery,” that’s a recipe for stagnation, not a burst of economic growth. It makes this the New Normal, along with 9% unemployment and a staggering housing market.

In other words, “Obama 2012: Hey, it could be worse!” Good luck with that one, champ.

Doughboy on September 29, 2011 at 9:30 AM

Adjusting for election season? Football season? What was special to adjust?

tomg51 on September 29, 2011 at 9:32 AM

Remember the bad old days during 2002-2006 when gdp was growing at 3% consistently. Good thing Democrats put and end to that with thei majorities in congress.

angryed on September 29, 2011 at 9:34 AM

Expect this number to get revised upward next week. Sharply.

That will be unexpectedly.

rbj on September 29, 2011 at 9:35 AM

Adjusting for election season? Football season? What was special to adjust?

tomg51 on September 29, 2011 at 9:32 AM

Stop asking questions. Math is just hard.

forest on September 29, 2011 at 9:36 AM

The funny part will be watching Wall Street go nuts because GDP grew 1.3%. I say the Dow will end about +200 today.

Mark1971 on September 29, 2011 at 9:37 AM

Given the circumstances, I’ll take it. Look around us. The only countries growing much faster than us are actual socialists, not the “any American liberal” kind. Adjusting domestic policy at the margins isn’t going to add 3 or more points to q/q GDP growth.

ernesto on September 29, 2011 at 9:37 AM

although a Labor Department official said government statisticians had problems seasonally adjusting the data.

In other words, they can’t massage the numbers unless it looks like they totally pulled them out of their…

ChuckTX on September 29, 2011 at 9:39 AM

There is cautious optimism the economy will skirt another downturn

Yeah. It’s easy to “skirt another downturn” when you never actually had an upturn.

eyedoc on September 29, 2011 at 9:40 AM

Recovery Summer Restoration Fall is off to a great start, now all we need to do is find 14 million jobs somewhere.

Bishop on September 29, 2011 at 9:41 AM

and the lsm continue to spin for dear leader….

cmsinaz on September 29, 2011 at 9:44 AM

Expect this number to get revised upward next week. Sharply.

yup

cmsinaz on September 29, 2011 at 9:44 AM

If the seasonal adjustment is horse manure, then let’s go to the unadjusted numbers from this year and last:

Week ending (W/E) 9/18/2010 – 382,341
W/E – 9/25/2010 – 372,551 (a non-adjusted 9,790 drop and a seasonally-adjustment drop of 13,000 to a seaonally-adjusted 456,000)

W/E 9/17/2011 – 353,820
W/E 9/24/2011 (subject to revision) – 324,940 (a non-adjusted 28,880 drop and a seasonally-adjusted drop of 37,000)

Short answer – while it was a significant drop, the seasonal seasoning is manure-flavored.

Steve Eggleston on September 29, 2011 at 9:47 AM

Does anybody really believe ANY of this stuff anymore?

Why?

golfmann on September 29, 2011 at 9:47 AM

golfmann on September 29, 2011 at 9:47 AM

But if you don’t believe in GDP growth figures, how will you promise to change them with republican policies???

ernesto on September 29, 2011 at 9:49 AM

Steve Eggleston on September 29, 2011 at 9:47 AM

I guess the Brewers making the MB Playoffs didn’t give the gdp a bounce!..:)

Dire Straits on September 29, 2011 at 9:50 AM

ernesto on September 29, 2011 at 9:37 AM

I see Greece!

tinkerthinker on September 29, 2011 at 9:52 AM

I miss those times when no one reported this stuff. Mainly because there was nothing to report.

Electrongod on September 29, 2011 at 9:52 AM

Electrongod on September 29, 2011 at 9:52 AM

Now it is unexpectly..Imagine that..:)

Dire Straits on September 29, 2011 at 9:54 AM

I guess the Brewers making the MB Playoffs didn’t give the gdp a bounce!..:)

Dire Straits on September 29, 2011 at 9:50 AM

That’s because the traders are Red Sox fans.

Steve Eggleston on September 29, 2011 at 9:55 AM

That’s because the traders are Red Sox fans.

Steve Eggleston on September 29, 2011 at 9:55 AM

rofl!..That was a good one!..:)

Dire Straits on September 29, 2011 at 9:56 AM

I might just change my name to Mr. Green Energy, that way I could get a $300 million federal loan that never needs to be paid back.

Bishop on September 29, 2011 at 9:57 AM

Didn’t someone recently say that the hurricane was going to bring back the economy?

tinkerthinker on September 29, 2011 at 9:57 AM

……I have never seen such apathy and discouragement through the business field like there is out there now.Car Industry,Mortgage Industry,Banking…..everyone I deal with is plodding through and “hoping” things will turn around.
I have three Independent Auto dealers that are on the verge of going out of business in the coming months.This on top of several(including 3 franchises) that have already gone out of business.Some Sales managers I talk to seem to have given up and accepted this as the “new norm”.
No energy,no enthusiasm,….just pushing to get by and squeak out a profit if they can.
I have dealers that were buying 100-150 units a week down to 20-30 units.
The only thing really moving is high milage/low cost vehicles because people have no money and can’t get the banks to give any up.
Banks are lending easier with new cars so they moving….but when you compare to the numbers only a few years ago…..the drop is significant.The backbone of earnings for most dealerships…service department and used cars….is way off for most.

Friends in Mortgage and Banking cut back on salaries/bonuses but their work has nearly doubled.Most not even sure if they will have jobs in the near future.

…and now our White House wants to regulate more, increase taxes,and increase the cost of doing business all in the name of firming up their base and getting re-elected.

How Progressive!!!!

Baxter Greene on September 29, 2011 at 10:01 AM

Didn’t someone recently say that the hurricane was going to bring back the economy?

tinkerthinker on September 29, 2011 at 9:57 AM

…yea…and I think liberals are also counting on an alien invasion.

Baxter Greene on September 29, 2011 at 10:02 AM

Another tidbit from Tom Blumer (note; NSA is non-seasonally-adjusted):

Though I understand the perspectives, I’ll hold my fire and hope that this is the beginning of something better, especially since the NSA number — even assuming a typical upward revision next week — is the lowest since May 2008.

Zero Hedge has a slightly-different take (bold in the original, :

Headlines will read of the impressive job ‘improving’ situation as initial claims fell 37k on the week (a two standard deviation improvement which seems extremely unlikely given the macro/micro backdrop). Once again proving their ineptitude, the claims print was massively better than even the most optimistic economist estimate – an incredible six standard deviations better than consensus.

I guess we’ll know next week whether this is a bunch of Bravo Sierra.

Steve Eggleston on September 29, 2011 at 10:03 AM

Dire Straits on September 29, 2011 at 9:56 AM

….good morning Straits.

Baxter Greene on September 29, 2011 at 10:03 AM

Baxter Greene on September 29, 2011 at 10:01 AM

+ 100..Excellent post!..:)

Dire Straits on September 29, 2011 at 10:03 AM

….good morning Straits.

Baxter Greene on September 29, 2011 at 10:03 AM

Good morning to you..:)

Dire Straits on September 29, 2011 at 10:04 AM

What boggles my mind is that anyone believes this propaganda. Come on people.

The AP story suggesting that 375,000 people losing their jobs represents job growth is mind boggling. Calling George Orwell! Is Mr. Orwell in the house?

dogsoldier on September 29, 2011 at 10:13 AM

Given the circumstances, I’ll take it. Look around us. The only countries growing much faster than us are actual socialists, not the “any American liberal” kind. Adjusting domestic policy at the margins isn’t going to add 3 or more points to q/q GDP growth.

ernesto on September 29, 2011 at 9:37 AM

We know you will take it Ernesto….that is the problem.
No matter how badly Obama’s liberal policies have failed….liberals will “take it”….

……….kind of like watching the “anti-war” crowd go from yelling “war is not the answer” to “it’s smart power” when a democrat is running the war machine….he!!,the “war is not the answer” crowd loves war so much now…they don’t even need Congressional Approval.

…Now we have Obama and his liberal minions who told everybody how great “recovery summer” was going to be….
………there will be “500,000″ jobs a month…
………….Obama’s economic dream teams forecast of 4% plus GDP and lower unemployment…..
…………”shovel ready” jobs after taking a cool trillion of the tax payers money…..
……………more than a Trillion dollars in tax increases passed and proposed….
………………the “Green job revolution” that blown billions in cronyism and job creation that comes to millions per job.

We have seen liberals go from yelling “Yes We Can” to “It could have been worse”……

…and now we sit with some of the worst economic conditions this country has ever seen and we get “I’ll take it” from the “adults” in charge.

Never has this country seen such activism and failure like we are seeing now from the “Hope and Change” crowd.

Baxter Greene on September 29, 2011 at 10:15 AM

What drives me crazy is when the Administration uses the arguement, “well, we aren’t losing 800,000 jobs like when we 1st took office”..that’s because there is no more jobs to lost. We have hit rock bottom!

Static21 on September 29, 2011 at 10:18 AM

GDP is not a good measure of a country’s creation of wealth even ignoring how it is defined and computed. A more meaningful measure is GDP per capita (GDP/C). I have never seen a plot of GDP/C, but I expect that we would be in recession for all or most of Obama’s reign if two successive quarters of a drop in GDP/C defined a recession rather than two successive quarters of a drop of GDP.

burt on September 29, 2011 at 10:21 AM

Why is so difficult to count the jobless claims benefits?

It’s all computerized. I don’t understand the difficulty.

bridgetown on September 29, 2011 at 10:26 AM

Bishop on September 29, 2011 at 9:57 AM

No kidding, hubby was just half-kiddingly was wondering how he could manipulate his bizz to qualify.
Shrugged his shoulders and headed out the door to do his part. Bless his heart.
Sigh.

pambi on September 29, 2011 at 10:27 AM

Yes I’m sure that Obama’s DoL is doing everything possible to minimize the real unemployment numbers, so that’s very difficult thing to do with the seasonally adjusted numbers. We wait to see how much higher they will go when they are revised in a couple of weeks. And 1.3 percent unemployment is worthy of France not the US.

eaglewingz08 on September 29, 2011 at 10:27 AM

ernesto on September 29, 2011 at 9:37 AM

Ernesto look north. Canada was socialist and with an economy like ours is currently. They smartened up and became prosperous, and their currency improved significantly relative to our depressing dollar.

burt on September 29, 2011 at 10:31 AM

burt on September 29, 2011 at 10:31 AM

Canada’s economy shrank in Q2 of 2011. Exports down 2.1%. That strong currency hurts after a while.

ernesto on September 29, 2011 at 10:35 AM

burt on September 29, 2011 at 10:31 AM

Plus, they still have universal health care. How are they not still socialists?

ernesto on September 29, 2011 at 10:42 AM

Would have been higher if it weren’t for all those summer blizzards !

Sandybourne on September 29, 2011 at 10:43 AM

So the MSM is still trying to ‘talk up the economy’. Too bad it doesn’t work that way.

GarandFan on September 29, 2011 at 10:45 AM

Most of Canada’s exports are to the US and much of that is for cars.

burt on September 29, 2011 at 10:50 AM

Ed wrote:

Another economic indicator indicated better news — so much so that it looks curiously like an outlier.

It’s not quite an outlier, because it still falls within the expected range for the current trend, but it certainly is unusual.

Going by the trend established since 9 April 2011, the change from the previous week amounts to a shift of about three standard deviations, which suggests that there’s something behind the shift. Problems in making seasonal adjustments might indeed account for that, but if there has been a positive shift in the outlook of employers, we’ll see it followed up in next week’s data.

In the case that something happened to create such a positive shift in the outlook of employers, it would be the result of something that happened 2-3 weeks earlier than the report date, most likely between 3 September 2011 and 10 September 2011. [The 2-3 week time lag is the result of employer's implementing a layoff decision at the end of their next pay cycle. With most Americans being paid either weekly or biweekly, that accounts for the time lag.]

If you can identify something that might lead U.S. employers to decide to not to lay off so many workers that happened within that window of time, then you might be able to answer the question of whether this week’s data is an outlier before new data is released next week.

ironman on September 29, 2011 at 10:57 AM

GDP is not a good measure of a country’s creation of wealth even ignoring how it is defined and computed. A more meaningful measure is GDP per capita (GDP/C). I have never seen a plot of GDP/C, but I expect that we would be in recession for all or most of Obama’s reign if two successive quarters of a drop in GDP/C defined a recession rather than two successive quarters of a drop of GDP.

burt on September 29, 2011 at 10:21 AM

Here is a link to chart showing US GDP per capita over time (since 1960) with data from the World Bank. Unfortunately, is only a yearly(not quarterly) and the last year it has is 2009. However, it does show the only drop in gdp per capita in the U.S. in the last 50 years was 2008-2009. GDP per capita dropped from $47,209 in 2008 to $45,989 in 2009. (A 2.58% drop in 1 year.)
In fairness, the World’s GDP per capita dropped from $9,164 in 2008 to $8,599 in 2009. (6.16% drop in 1 year)
The important thing is that 2008-2009 was the first drop in GDP per captia in the last 50 years.

New_Jersey_Buckeye on September 29, 2011 at 11:09 AM

I’m so jaded by this administration that I simply can’t buy this number. They’re playing with all the others, why wouldn’t they play with this one too? I’m calling shenanigans.

BKeyser on September 29, 2011 at 11:18 AM

Why is so difficult to count the jobless claims benefits?

It’s all computerized. I don’t understand the difficulty.

bridgetown on September 29, 2011 at 10:26 AM

They dont actually count the applications. The reported number actually comes from a survey, an estimate and a couple “adjustments”.

Not hard accounting. A week later, the BLS and DoJ tweak the numbers based on some (but not necessarily all) hard data.

If you want a shock go find the Youngstown state study on unemployment based on hard numbers.

Shadowstats.com is also a good place to look.

One thing folks need to get their heads around is the fact that the real labor force is growing yet the ministry of truth keeps adjusting it lower and lower.

dogsoldier on September 29, 2011 at 11:29 AM

Sorry DoJ should read DoL.

dogsoldier on September 29, 2011 at 11:29 AM

Expect this number to get revised upward next week. Sharply.

Indeed, “unexpectedly”, of course.

Schadenfreude on September 29, 2011 at 12:28 PM

As the employment base shrinks, a constant rate of lost jobs who leaded to a smaller number of new claims month by month. The number staying the same would be an indication of an increasing rate of job lose.

Laurence on September 29, 2011 at 3:07 PM