Aug 26th 2011, 12:52 by R.A. | LINDAU, GERMANY
THE Bureau of Economic Analysis just released its second estimate of GDP growth for the second quarter, and the pace of expansion was revised down, from 1.3% to 1.0% (a bit worse than the revision to 1.1% that was expected). The 0.4% first quarter growth estimate wasn't changed, which means that for the first half of 2011 the American economy expanded at a 0.7% pace. That's below the rate of population growth, which is to say that in per capita terms output continues to shrink. So how are things looking forward? Will consider the BEA's take on the improvement in the economy from the first quarter to the second:
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 decelerations in PCE and in exports and a downturn in private inventory investment.
Imports subtract from measured output, so falling imports made for faster growth"”but still signalled a weakening domestic economy. Federal government spending was up slightly in the second quarter, but the net government contribution was still a drag, thanks to falling state and local spending. Moving forward, the federal government will join state and local governments in consistently subtracting from output. Private investment and consumption could make up the gap, but American confidence has been badly shaken by the debt-ceiling battle and financial market havoc.
Does a double-dip loom? It's a reasonable possibility. Much depends on what the Fed does for the remained of the year. As my colleague argues in the print edition, however, it doesn't matter all that much. Growth too weak to generate net employment increases isn't meaningfully better than slow contraction. America is quite likely to get one or the other of those unpleasant alternatives in the second half of 2011.
UPDATE: Of course, Justin Wolfers tweets:
Did GDP lead us astray again? 2011 Q1: GDP +0.4%; GDI +2.5%. Q2: GDP +1.0%; GDI +1.5%.
GDI is Gross Domestic Income. It's an alternative estimation of national output which in theory is equivalent to the spending-side measure. In practice, however, the two often differ, and some research suggests that GDI is the more accurate of the two"”revisions to GDP typically move it closer to GDI.
The GDI figures is particularly interesting here, because it fits much most comfortably with available employment data. Job growth was relatively strong early in the year, and especially from February to April. That makes very little sense when stacked next to the 0.4% first quarter GDP number, and much more sense against the 2.5% GDI number.
It's worth noting, however, that while the GDI figures are stronger than the GDP figures, they still point to a slowdown in economic activity as the year went on, and they still point to an economy performing well below potential in the second quarter.
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Keynes, 1936, now.
The upturn in Federal spending was negated by the downturn in state and local. G dropped $5.5 Billion (all numbers are annualized).
Yes, we came out a bit better in Net eXports, X added $3.1 Billion.
I increased $27.2 Billion. Residential (new homes, etc) was up $2.7 Billion. So it looks like business did the heavy lifting.
C increased $10.0 billion.
Looks like we need business to do more investing. They are buying more equipment & software, but structures looks like it is still bottoming as it has been trending sideways.
Regards
The relevant question is not who is to blame for this, the relevant question is who is able to pull us out of this.
And the answer to this we now know is not Barack Obama. He has been given ample opportunity and has not produced. There is no evidence that any of his rehashed, tired ideas will produce going forward.
The American people need alternatives and it will be a tragedy if Barack Obama is not at least challenged in the Democratic Primaries.
@hedgefundguy: "So it looks like business did the heavy lifting."
Of course.Corporate America has been hoarding cash and knows how to play the game while consumers have been accumulating debt and are clueless.
That what you mean?
jvictor1789,
It's sorta like "the chicken or the egg" argument.
Some argue that consumers need to consume more to get business and the economy rolling.
I argue that business needs to invest (and hire) to be the leaders in confidence.
Regards
In this blog, our correspondents consider the fluctuations in the world economy and the policies intended to produce more booms than busts. Adam Smith argued that in a free exchange both parties benefit, and this blog's aim is to encourage a free exchange of views on economic matters.
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