GDP Report Stinks Up the Place

Tim Iacono

In the “advance” estimate for the second quarter, the Commerce Department reported that real economic growth in the U.S. increased at an annual rate of 1.3 percent, far below consensus estimates of a two percent rate, and, as part of the annual data revisions, growth in the first quarter was revised downward, from a 1.8 percent rate to just 0.4 percent.

If not for the massive downward revision to Q1, analysts would be talking about Q2 being the worst quarter for growth in the U.S. since the recovery began two years ago, but, on a relative basis, now economic activity in Q2 doesn’t look so bad.

Personal consumption grew at just a 0.1 percent rate, the slowest since early-2009 when consumer spending fell at an annual rate of 1.9 percent, and government spending contracted at a 1.1 percent rate, its third straight quarter of declines.

The biggest positive contributions came from private domestic investment and net exports, the former contributing 0.87 percentage points to the growth rate and the latter contributing 0.58 percentage points, in what can only be described as an absolutely dismal account of the U.S. economy during the first half of the year.