Third time is the charm, apparently.
U.S, real GDP fell at an annualized rate of 0.7% in the second quarter, according to this morning’s data release from the Commerce Department. The figure was the regular third revision of quarterly data.
And it surprised economists and likely the stock market too. The second revision had put the drop in second quarter economic activity at an annualized 1%. The consensus among economists was that the third revision would take growth down a bit further to a 1.2% decline.
Why did the third revision say the economy was doing better than earlier figures?
The main difference–and there’s not a lot of difference let’s be honest between an economy contracting at a 1% annual rate and one contracting at a 0.7% annual rate–came from figures showing that business investment had declined less than in the earlier version of the numbers and that government spending had been slightly higher.
Corporate profits moved in the opposite direction with the revision showing a 3.7% quarter to quarter increase instead of the 5.7% increase shown by the second revision.
This report will be seen as support for the consensus view among economists that the economy will grow at a 2.6% rate in the second half of the year.
The drop in GDP was the fourth quarterly drop in a row. That’s the longest string of quarterly contractions since the start of quarterly records in 1947. The drop since the second quarter of 2008 is 3.8%. That makes this the deepest recession since the 1930s.
One piece of data that worries me: Government spending climbed by 6.7% in the quarter according to these revised figures. That’s exactly what you’d expect as the stimulus package works its way into the economy. That spending, however, ends in 2010. With consumer spending down 0.9% in the quarter, it’s still an open question, in my mind anyway, whether or not we’re seeing a sustainable recovery that will keep the economy chugging after the stimulus spending ends.
looking back at gdp is not looking forward, agree there is not much news that is good out there. GM dealers closing plus saturn will be a lot more large pressure on u/e, PA still does not have a budget, revenues declining, muni bonds scary, no one is lending to AAA commercial r/e folks they cant get money, who is going to buy the debt coming due in commercial r/e, foreclosures, empty offices, rents falling. retail will be crushed, CIT issue w hit and reverberate more. the worst is yet to come for sure. Canada still looks good. loonie up, my divs this mo a lot higher w yields, NO housing issues per Manulife CEO on bloomberg yesterday.
The Dems can read the polls. You’ve got 62% in recent surveys saying they’d prefer a longer recession to mor government spending on stimulus. Just donb’t see a package passing in an election year. And the, we’re waiting until things get bad enough in 2011 to make a big stimulus politically possible. Always fascinating (and dangerous) to try to figure out what the politicians will do, I grant you. You have to throw logic out the window and that sort of leaves you adrift in the realm of the lunatic but possible.
I agree with WSF. I don’t see the various stimulus packages ending in 2010. Obama and the Dems have to keep the fires stoked going into the mid-terms.
You are assuming the stimulus spending will end in 2010. I look at the housing market stimulus which was a $7.5k loan in 2008 that became a $8k free money in 2009. Looking at the news it looks like we may get another attempt to boost for housing market. Though I cannot say for sure another stimulus package will be on the way to boost the economy as a whole, I am unwilling to say for sure the stimulus will end in 2010.