Breaking: Q2 GDP 1.5%; Update: 2011Q4 revised upward 1.1 points to 4.1%?

posted at 8:34 am on July 27, 2012 by Ed Morrissey

The decline in American production continued in the second quarter, according to the new release from the Bureau of Economic Analysis.  The Q2 GDP growth rate (annualized) was a meager 1.5%, down from 1.9% in the first quarter and 3.0% in 2011Q4:

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 1.5 percent in the second quarter of 2012, (that is, from the first quarter to the second quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.0 percent.

The Bureau emphasized that the second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The “second” estimate for the second quarter, based on more complete data, will be released on August 29, 2012.

The declines came in durable goods (down 1.0%), computers (0.07%), and federal government expenditures (0.4%), the latter of which was down 4.2% in Q1.

Inventories rose again, adding 0.32% to the final number, after having declined in Q1.  The real final sales of domestic product only came to 1.2%, half of Q1′s 2.4%.  Personal consumption expenditures only increased 1.5%, down from 2.4% in Q1 and pointing to a precipitous decline in demand.

Right now, the headline on CNBC is: “Economy Grew Faster Than Expected in 2Q, Up 1.5%”.  The futures market climbed a bit on the news, so that may not be far off:

U.S. stock index futures added to modest gains Friday, following a report that showed the economy grew at a faster-than-expected pace in the second quarter.

Expectations must have been pretty low for a 1.5% GDP to spark optimism.

Update: The AP is a lot less optimistic.  Their article has nothing more than a placeholder lead paragraph at the moment, but they emphasize the drop in consumer spending:

US economic growth slows to 1.5 percent annual rate from April-June, consumer spending weakens.

Maybe this is a good time to break out Barack Obama’s Mission Accomplished statements:

Oh, sorry — that last one wasn’t Obama, but you can understand how one might confuse it with the other statements.

Update II: Reuters actually takes a more cautious tone, reporting that the decline wasn’t as bad as expected, but doesn’t try to put any more positive spin on what is clearly a bad result.  They also note that the BEA has revised 2011Q4 to 4.1% growth, a rather eye-popping change from the already thrice-revised 3.0%:

U.S. economic growth slowed less than expected in the second quarter as consumers spent at their slowest pace in a year, potentially pushing the Federal Reserve closer to pumping more money into the economy.

Gross domestic product expanded at a 1.5 percent annual rate between April and June, the weakest pace of growth since the third quarter of 2011, the Commerce Department said on Friday. Consensus estimates forecast growth at a 1.3 percent pace.

First-quarter growth was revised up to a 2.0 percent pace from the previously reported 1.9 percent. Output for the fourth quarter was raised to a 4.1 percent rate from 3.0 percent.

I’d like to get an explanation of that upward revision.  A change from 1.9% to 2.0% might be reasonable, even after the BEA stated the figure three different times.  But the jump from 3.0% to 4.1%  in one revision six months after the fact looks very, very odd.

Update III: Zero Hedge has a graphic to show the revisions made in this report over the past year, and adds this thought:

And just as important, today the BEA revised historical GDP data retroactively. Of note 2010 GDP was revised from 3.0% to 2.4%, while Q3 2011 GDP was revised from 3.0% to 4.1%, indicating that the slowdown we are experiencing is in fact far worse than previously expected. It also shows that HFT trigger buying or selling on GDP data is completely meaningless as today’s data will be revised violently higher or lower in a year, making it completely irrelevant.

Except for 2011Q1 and Q3, all the revisions were upward — and that makes this decline look even worse.

Update IV: However, as Bloomberg points out, the rest of the revisions make the recovery look even weaker than the BEA’s previous numbers showed:

With today’s release, the Commerce Department’s Bureau of Economic Analysis also issued revisions dating back to the first quarter of 2009. The changes showed the first year of the recovery from the worst recession in the post-World War II era was even weaker than previously estimated.

GDP grew 2.5 percent in the 12 months after the contraction ended in June 2009, compared with the 3.3 percent gain previously reported, the Commerce Department said.

But, y’know … his plan worked.

Update V: I made an error on the chart description — there were downward revisions to both 2011Q1 and Q3, not just Q1. I’ve fixed it above.


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Comment pages: 1 2

“Breaking: Rasmussen has Romney up 5points today.

The ‘You didn’t build that’ hits keep coming.”

Only means something if other polls show the same trend. Let’s see what Gallup says today before doing cartwheels.

gumbyandpokey on July 27, 2012 at 9:57 AM

karenhasfreedom on July 27, 2012 at 9:31 AM
And the Disability roll totals were up, no doubt ??
Oy.

pambi on July 27, 2012 at 9:57 AM

Still bitterly clinging to my job here.

but it seems the dark side is calling more loudly to everyone

tomg51 on July 27, 2012 at 10:00 AM

Isn’t three consecutives GDP reports to download a sign of a recession?

Falz on July 27, 2012 at 10:02 AM

Why are we talking about this Q2 GDP crap? “Backside” vs “back garden.” Does Ann REALLY have a horse? Is Mitt too rich? This is what’s important!

NotEasilyFooled on July 27, 2012 at 10:02 AM

Don’t worry guys, Mitt Romney is here to save us

Notorious GOP on July 27, 2012 at 8:37 AM

MODERATOR: Governor, could you please define the term “Income Statement”?

ROMNEY: Certainly. It’a a financial statement that measures a company’s financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year.

MODERATOR: President Obama, same question?

THE PRESIDENT: Ahh… My opponent ahhh… apparently knows nothing about… our economy or ahh… economics or business. Everyone knows… that the president of the ahhh… United States makes $400,000 per year, and… ahhh… unlike my opponent, I don’t hide behind my income statement.

(Audience erupts into wild applause)

turfmann on July 27, 2012 at 10:04 AM

If you won’t take this seriously, and the Obama administration knows that they can get away with lies on the White House web site, how can you expect them to tell the truth on another government web site?

ITguy on July 27, 2012 at 9:19 AM

.
Just my opinion but I take Ed and Allah as serious as they supported the eligibality requirements for POTUS.
If I had let unanswered questions go without answers, most likely, during 18 years in the intelligence community with service in 39 countries, I would have come back in a bag or a box.

News2Use on July 27, 2012 at 10:04 AM

http://www.dailymail.co.uk/news/article-2178668/London-Olympics-2012-Team-GB-winning-start-victory-womens-football-clash-New-Zealand.html
Women soccer opened to empty stadiums.

http://www.guardian.co.uk/sport/2012/jul/17/london-2012-cull-football-tickets
Tickets not selling even for soccer mad Brits.

Look forward to the snotty Brits to lose their shirts in their Olympic fiasco.

bayview on July 27, 2012 at 10:05 AM

C’mon commie bayam, defend your ideology.

tom daschle concerned on July 27, 2012 at 10:07 AM

MSNBC: But Romney insulted the Queen, or something…. and he has a horse, or something… and… and… taxes… yeah… he hasn’t released his taxes from the year he buzz-cut that kid in high school, or something….

Move along… nothing to see here….

PA Guy on July 27, 2012 at 10:08 AM

A little better than expected, but basically no surprise. University of Michigan confidence survey also came in a little better than expected (72.3 vs. 72), so there is early evidence that the economy may have weathered the Spring slowdown better than we thought. Still, expectations are low for the the July employment report due out next Friday, as business remains frozen pending the European debt crisis and fiscal policy changes here at home next year. Markets are happy, though … Dow just below 13K. Has the Fed put QE3 back in the holster? Next week’s jobs report may be the the key …

TouchdownBuddha on July 27, 2012 at 10:08 AM

As far as those ‘revision numbers’ go, ever hear the expression PUTTING LIPSTICK ON A PIG?

GarandFan on July 27, 2012 at 10:16 AM

: “Economy Grew Faster Than Expected in 2Q, Up 1.5%”.

WTF????

…could they lower the bar any further.

“Economy Grew Faster Than Expected in 2Q, up 1.5% now even with Zimbabwe

Baxter Greene on July 27, 2012 at 10:25 AM

Just more mumbo-jumbo voodoo statistics.

stukinIL4now on July 27, 2012 at 10:25 AM

This war on women is taking the economy…heh, heh!

Don L on July 27, 2012 at 10:32 AM

That’s supposed to be “tanking” (I didn’t spell that wrong by myself said Obama)

Don L on July 27, 2012 at 10:33 AM

The percent change from the preceding year in real GDP was revised up from a decrease of 3.5 percent to a decrease of 3.1 percent for 2009, was revised down from an increase of 3.0 percent to an increase of 2.4 percent for 2010, and was revised up from an increase of 1.7 percent to an increase of 1.8 percent for 2011.

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

That’s a full 20% cut in the GDP growth estimate for 2010, two years after the fact.

With this kind of uncertainty, it seems almost ludicrous to have these pinpoint estimates that are revised, revised, and revised again. I realize investors and business people need to react to whatever data is available. But for the rest of us, wouldn’t it better for the government to provide an estimated range or a narrative assessment?

bobs1196 on July 27, 2012 at 10:34 AM

That is a net drop of 0.1 percentage points.

Steve Eggleston on July 27, 2012 at 8:57 AM

..more importantly, none o’ them numbers are 4-7% which is what a recovery should be.

The War Planner on July 27, 2012 at 10:38 AM

USA USA USA!!!!!!!

http://www.breitbart.com/Breitbart-TV/2012/07/26/Congressmans-Anti-Big-Government-Rant-Gets-Standing-Ovation

Spread the link!!!!! Finally SOMEONE puts words to the lie of BIG GOVERNMENT!!!!

USA USA USA!!!!

PappyD61 on July 27, 2012 at 10:43 AM

The declines came in durable goods (down 1.0%), computers (0.07%), and federal government expenditures (0.4%), the latter of which was down 4.2% in Q1.

I guess Obummer isn’t the big-spending liberal those mean ole Republicans say he is! /s

KS Rex on July 27, 2012 at 10:46 AM

..more importantly, none o’ them numbers are 4-7% which is what a recovery should be.

The War Planner on July 27, 2012 at 10:38 AM

The New Normal. Going year-over-year by quarter is just as ugly as the highest year-over-year real GDP growth slipped from 3.5% (3Q2009-3Q2010) to 2.8% (same period).

The cumulative annualized recovery and the growth over the last 4 quarters are the same – 2.2%.

Steve Eggleston on July 27, 2012 at 10:57 AM

“Breaking: Rasmussen has Romney up 5points today.

The ‘You didn’t build that’ hits keep coming.”

Only means something if other polls show the same trend. Let’s see what Gallup says today before doing cartwheels.

gumbyandpokey on July 27, 2012 at 9:57 AM

Gallup (as reported on RealClearPolitics) has the race tied 46-46.

Nothing to cartwheel about, but Gallup’s poll doesn’t contradict the Rasmussen data. The reality may be somewhere in between, but that would still be a small Romney lead.

Steve Z on July 27, 2012 at 10:59 AM

If you won’t take this seriously, and the Obama administration knows that they can get away with lies on the White House web site, how can you expect them to tell the truth on another government web site?

ITguy on July 27, 2012 at 9:19 AM

Just my opinion but I take Ed and Allah as serious as they supported the eligibality requirements for POTUS.
If I had let unanswered questions go without answers, most likely, during 18 years in the intelligence community with service in 39 countries, I would have come back in a bag or a box.

News2Use on July 27, 2012 at 10:04 AM

I agree completely. Ike produced his birth certificate even after he and Churchill were instrumental in saving Western Civilization. Giving Obama a pass on this issue set the standard for his Presidency.

Conservative pundits were intimidated by the left wing MSM. And still are. It is moronic to use the term birther to refer to anyone who asked him to produce his birth certificate or those who believe that the Constitution requires that in order to be an NBC (as opposed to a mere citizen) the Constitution requires that both parents must be citizens at the time of birth.

Basilsbest on July 27, 2012 at 10:59 AM

I like how Ed and ZeroHedge say the previous upward revision makes this slowdown even worse than we thought. Why is an upward revision considered bad news? If it had been revised downward would that have been good news that our total GDB is smaller than we thought? Obviously today’s number is bad news, but is there any news from prior quarters that you wouldn’t consider bad news if you’re saying an upward revision is bad?

tneloms on July 27, 2012 at 11:08 AM

Let me be clear. My regime inherited the worst economy in 45 million years. I didn’t build that. The Dinosaurs did. And yes they’ve been breaking wind but please just give me 4 more years. My plans are working!

Uh, guys can you fix the tele–corpseman. Warren Buffet’s secretary, I mean thank you folks.

CorporatePiggy on July 27, 2012 at 9:01 AM

Is the Teleprompter spewing in Austrian again?

Sekhmet on July 27, 2012 at 11:19 AM

And yet the state is still comfortably safe for Democrats.

Happy Nomad on July 27, 2012 at 9:55 AM

no, it’s not. Romney will win this state.

8 weight on July 27, 2012 at 11:34 AM

All you guys can do is complain. The Chocolate ration is being raised from 20 oz to 16 oz.

Be happy in your work.

Bulletchaser on July 27, 2012 at 11:49 AM

That’s a full 20% cut in the GDP growth estimate for 2010, two years after the fact.

With this kind of uncertainty, it seems almost ludicrous to have these pinpoint estimates that are revised, revised, and revised again. I realize investors and business people need to react to whatever data is available. But for the rest of us, wouldn’t it better for the government to provide an estimated range or a narrative assessment?

bobs1196 on July 27, 2012 at 10:34 AM

I prefer to have the raw numbers so I can do my own narrative assessment. Can you imagine if all we saw was, “Economy is doing fine. Go back to sleep until we need your vote.”?

Steve Eggleston on July 27, 2012 at 11:49 AM

The SHANIQWA economy…

mnjg on July 27, 2012 at 12:51 PM

I Don’t care what the GDP says! I just know that the place where my husband works, a garden nurery NO ONE IS SPENDING MONEY!!! His hrs are being cut To 38 hrs a week and last yr. they were busy! No one is spending money for those extras like landscaping!

lisa fox on July 27, 2012 at 12:55 PM

tneloms on July 27, 2012 at 11:08 AM

Your interpretation skills leave a lot to desired. They did not say the upword revision was bad they said that the upword revision means the slide in Q1, Q2 data is worse.

chemman on July 27, 2012 at 1:20 PM

“Breaking: Rasmussen has Romney up 5 points today.”

Carney: Romney didn’t build that lead, he had help, um, er, oops.

socalcon on July 27, 2012 at 1:42 PM

“But the jump from 3.0% to 4.1% in one revision six months after the fact looks very, very odd.”

Banks manipulated LIBOR and it’s okay to be outraged about that but the federal government pumps out bulls–t statistics on inflation and the economy all the time. Funny I don’t hear MSNBC and Obama complaining about that.

Django on July 27, 2012 at 1:55 PM

Romney is up 5 in the latest Rasmussen poll. I am sure it is the economy. All the rest of this stuff is just noise.

Terrye on July 27, 2012 at 5:17 PM

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