US Economy 2nd Qtr Growth: 3.3%/yr

[Surlethe]

BBC

US GDP rebounds with 3.3% growth

The US economy grew at a revised 3.3% annually in the second quarter of 2008, the Commerce Department said, much higher than its first estimate of 1.9%.

The rebound was linked to strong US exports, helped by the weak dollar, while government tax rebates also boosted consumer spending.

GDP grew at a rate of 0.9% in the first quarter, after a 0.2% contraction in the last three months of 2007.

The Federal Reserve has warned the economy will remain weak this year.

"While we're not out of the woods yet, maybe we're beginning to see some sunlight," said John Wilson, equity strategist at Morgan Keegan.

"At some point, the market will begin to look through the trough and gauge the strength of the coming upturn."

'No recession'

The data showed that exports grew at an annualised rate of 13.2%, higher than the government's initial estimate of 9.2%.

Imports fell at a rate of 7.6% as the US economic slowdown reduced demands for goods made overseas.

The improved trade balance added 3.1 percentage points to second-quarter GDP, the biggest since 1980.

The slowdown in the housing market was evident, as builders cut back and businesses reduced their spending.

Consumer spending, boosted by the government's $600 tax rebate payments, rose by 1.7%, slightly higher than the previous quarter's 1.5%.

Some observers said that the figures lent support to the argument that the US was not heading for a recession.

"For a recession the economy is certainly growing very quickly," said Avery Shenfeld, senior economist at CIBC World Markets.

"A lot of that growth is driven off exports and pessimists might say that can't continue during slowing growth overseas.

"But I would say this happened precisely during the period of slowing growth overseas ... this is still an economy that faces slow times but not a recession."

16-year low

However recent data on the US housing market suggests a grim outlook for the sector.

US house prices were down a record 15.4% in the April to June quarter compared with a year ago, according to a closely-watched report released earlier this week.

The decline was recorded by the latest S&P/Case-Shiller survey of US national home prices.

The report said the fact that the falls were nationwide was the latest sign the US housing downturn is continuing.

Separate government data said sales of new homes were at an annual rate of 515,000 units in July, up slightly from June, but still near a 16-year low, and half the rate of new home sales one year ago.

Well, we're not in the midst of a recession, so I'll eat my socks. Export growth is impressive -- without it, we'd apparently only have 0.2% growth.

[Darth Wong]

Yet again, economic growth is cited as the be-all and end-all of the health of an economy.

[Surlethe]

Yet again, economic growth is cited as the be-all and end-all of the health of an economy.

That value judgment so permeates US discourse, it's difficult to get away from it. People simply think, "The economy is growing at a stunning rate!" and they don't step back and look at the well-being of the people around them.

Perhaps there needs to be a shift away from using single-value statistics to describe the economy, to something more nuanced. For example, you can say that the US per-capita GDP is something like $35,000, or you can say that the income distribution is such-and-such a probability density (log-normal distribution, IIRC?). The latter says more than the former, and permits one to focus on everyone simultaneously rather than simply a single average person.

[Illuminatus Primus]

These announcements are important, but not as promising as hearing "unemployment down," "average cost of education in decline," "real working and middle class incomes on the rise."

[Admiral Valdemar]

When, exactly, will people fathom that endless growth is a) not all that useful an indicator and b) doomed to fail sooner or later, causing other issues?

If they're not making more than last year, just breaking even, say, then it's a horrible turn. Fractional reserve banking is going to be seriously screwed when resource constraints start really biting. Not that we need that, what with the mismanaged economies we live in now anyway (120% mortgages? LOL).

[Big Phil]

The rebound was linked to strong US exports, helped by the weak dollar, while government tax rebates also boosted consumer spending.

The Federal Reserve has warned the economy will remain weak this year.

"While we're not out of the woods yet, maybe we're beginning to see some sunlight," said John Wilson, equity strategist at Morgan Keegan.

"At some point, the market will begin to look through the trough and gauge the strength of the coming upturn."

Imports fell at a rate of 7.6% as the US economic slowdown reduced demands for goods made overseas.

The slowdown in the housing market was evident, as builders cut back and businesses reduced their spending.

Consumer spending, boosted by the government's $600 tax rebate payments, rose by 1.7%, slightly higher than the previous quarter's 1.5%.

US house prices were down a record 15.4% in the April to June quarter compared with a year ago, according to a closely-watched report released earlier this week.

The report said the fact that the falls were nationwide was the latest sign the US housing downturn is continuing.

Separate government data said sales of new homes were at an annual rate of 515,000 units in July, up slightly from June, but still near a 16-year low, and half the rate of new home sales one year ago.

I cherry picked sections that I thought were relevant. We may not technically be in a recession, but since unemployment is up, real wages are down, and we have significant inflation (particularly food and gasoline), and jobs are being exported left and right, only a Republican or an imbecile would say the economy is healthy at the moment.

[Admiral Valdemar]

It's healthier than expected, just anyone expecting the good times to carry on as they have for the last near two decades is in for a shock. I always think of that estate agent director last year on the Tonight programme stating he didn't see house prices falling at all. Ever. And with a serious face. Either he missed out a little qualifier on the time-scale there, or he's a fucking mug. I'm thinking the latter.

Anyone who uses official government figures to calculate whether they're losing out or not needs their head checking. Food and energy alone where I live will eat any future salary boost I get, if any, for the next several years.

[Big Phil]

It's healthier than expected,

Agreed, but isn't that like telling an amputee "cheer up, we only had to cut below your knee!"

[Admiral Valdemar]

Yes. It's double-plus good.

[The Yosemite Bear]

yeah, my lord and master in his high office building can now afford another mansion, whilst I can't afford to fix my car, fix my computer, and still pay my health and food expenses. (the car lost out this month) *though it's going to get me back, I'm sure*

I really am feeling like a serf

[J]

One small problem, from the GDP deflator charts I'm viewing on the BEA website the deflator rate they're using is less than 1.5%, annualized. Which means the inflation correction they're using to get from the raw GDP numbers to the number which they release is a 1.5% downward adjustment on an annualized basis. Not even the core inflation numbers which omit food and energy are that low, the broad based inflation index as I recall is 5.6% or 5.7% on an annual basis. Use that to adjust the GDP and it goes negative which should come as no surprise to anyone. If actual inflation rates are used to adjust the GDP numbers instead of the questionable deflator index, it would show that we've been in a recession for a year.

[Illuminatus Primus]

So is this a case of political manipulation? Has GWB eroded that much confidence and stability in our economic institutions? That now they're servile political instruments?

[The Duchess of Zeon]

I remember way back in 2004 or so on making the then-disquieting to everyone else prediction on the conservative HPCA board that a weak dollar would be healthy for the United States because it would stimulate a resurgence of American export industry. Now the correctness of that prediction is worth 3.1% economic growth, and without it our economy would be virtually stagnant. With luck, the days of outsourcing are done forever. The weaker the dollar gets, the better, within reason.

[J]

So is this a case of political manipulation? Has GWB eroded that much confidence and stability in our economic institutions? That now they're servile political instruments?

Who knows what's going on or why? Earlier this year there was a BLS employment report which claimed the auto industry had added thousands of new jobs...when every single car company & their supporting companies were laying off workers by the tens of thousands. I'm still puzzling over that one.

[Admiral Valdemar]

Until the dollar loses reserve status. Then you're in the shit. Not that things are peachy now, since people need to still be able to stand up to take advantage of new business. Plus, I don't see China and others being able to keep up their constant growth without hitting a wall sometime soon. They have to falter eventually, and it may as well be when the bigger partners of the G8 get in trouble.

[Pelranius]

I remember way back in 2004 or so on making the then-disquieting to everyone else prediction on the conservative HPCA board that a weak dollar would be healthy for the United States because it would stimulate a resurgence of American export industry. Now the correctness of that prediction is worth 3.1% economic growth, and without it our economy would be virtually stagnant. With luck, the days of outsourcing are done forever. The weaker the dollar gets, the better, within reason.

I would just like to know what those exports consist of.

[The Duchess of Zeon]

Until the dollar loses reserve status. Then you're in the shit. Not that things are peachy now, since people need to still be able to stand up to take advantage of new business. Plus, I don't see China and others being able to keep up their constant growth without hitting a wall sometime soon. They have to falter eventually, and it may as well be when the bigger partners of the G8 get in trouble.

Oh, I don't disagree, but for the moment there is some recovery taking place, which if anyone was intelligent would be used as a breather in which to desperately been instituting measures to stave off the collapse. Fat chance of that, though. I do however remember commenting last year that we'd have another decade of Happy Times left ahead before the economy crashed permanently and decisively.

[Admiral Valdemar]

Just watch. Obama (FSM willing), gets in... just in time to inherit a massive stampede of bad news about the economy that puts this to shame. They'll figure out we're in recession (and have been for ages) just as he gets inaugurated, and suddenly forget Bush may have had a slight hand in this.

[Jadeite]

I would just like to know what those exports consist of.

According to the CIA factbook, $1.149 trillion worth of exports in 2007, composed of "agricultural products (soybeans, fruit, corn) 9.2%, industrial supplies (organic chemicals) 26.8%, capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) 49.0%, consumer goods (automobiles, medicines) 15.0% (2003)."

[Surlethe]

One small problem, from the GDP deflator charts I'm viewing on the BEA website the deflator rate they're using is less than 1.5%, annualized. Which means the inflation correction they're using to get from the raw GDP numbers to the number which they release is a 1.5% downward adjustment on an annualized basis. Not even the core inflation numbers which omit food and energy are that low, the broad based inflation index as I recall is 5.6% or 5.7% on an annual basis. Use that to adjust the GDP and it goes negative which should come as no surprise to anyone. If actual inflation rates are used to adjust the GDP numbers instead of the questionable deflator index, it would show that we've been in a recession for a year.

Could you please link me to some sources for this GDP deflator manipulation?

[Pelranius]

I would just like to know what those exports consist of.

According to the CIA factbook, $1.149 trillion worth of exports in 2007, composed of "agricultural products (soybeans, fruit, corn) 9.2%, industrial supplies (organic chemicals) 26.8%, capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) 49.0%, consumer goods (automobiles, medicines) 15.0% (2003)."

That's good. I was worried that agricultural products would account for a higher portion of the said exports.

[J]

Could you please link me to some sources for this GDP deflator manipulation?

BEA GDP deflator table You can play with the numbers yourself and figure out the adjustment rate they're using each quarter.

BLS inflation table The first row is the overall inflation rate, the last row is core inflation.

[Patrick Degan]

It's healthier than expected, just anyone expecting the good times to carry on as they have for the last near two decades is in for a shock.

Good times? What are those? I haven't seen good times in this country since 2000. It's been all steadily downhill or flatine

I always think of that estate agent director last year on the Tonight programme stating he didn't see house prices falling at all. Ever. And with a serious face. Either he missed out a little qualifier on the time-scale there, or he's a fucking mug. I'm thinking the latter.

He's a moron or a liar. It's amazing how accurately you can take the pulse of a town working for a newspaper. I see directly how business —particularly real estate— has fallen off in the two years I've been at my current job and it's not pretty. One of the main realtors in town went under last month, and the others have had properties sitting on their listings since the last quarter of 2007, some for longer. The estate agents are not moving houses, plain and simple, no matter how much they've been marking them down, and I've seen the prices decline every month since last October. The monthly real estate book is shrinking in page count because the market has been flat or in outright decline and the agencies are cutting back on advertising. More than half the legal notices we run every day now are foreclosures. If it weren't for the local Goodyear plant, this town would really be up shit creek.

[Broomstick]

It's healthier than expected, just anyone expecting the good times to carry on as they have for the last near two decades is in for a shock.

Good times? What are those? I haven't seen good times in this country since 2000. It's been all steadily downhill or flatine

Well, I would have said 2001, but I totally agree with the general idea.

I always think of that estate agent director last year on the Tonight programme stating he didn't see house prices falling at all. Ever. And with a serious face. Either he missed out a little qualifier on the time-scale there, or he's a fucking mug. I'm thinking the latter.

He's a moron or a liar.

He can't be both?

Whether or not we meet the (largely arbitrary) definition of a formal recession or not, there are serious problems with the US economy, there has been for some time, and they aren't going away overnight.

Any "breathing room" I get will be spent in building a nest egg and weaving a safety net. Anything else is ridiculous. Well, if I win a 100 million dollar lottery prize things would be different, but that's just not going to happen because I don't usually buy lottery tickets.

[Col. Crackpot]

Good times? What are those? I haven't seen good times in this country since 2000. It's been all steadily downhill or flatine

I always think of that estate agent director last year on the Tonight programme stating he didn't see house prices falling at all. Ever. And with a serious face. Either he missed out a little qualifier on the time-scale there, or he's a fucking mug. I'm thinking the latter.

He's a moron or a liar. It's amazing how accurately you can take the pulse of a town working for a newspaper. I see directly how business —particularly real estate— has fallen off in the two years I've been at my current job and it's not pretty. One of the main realtors in town went under last month, and the others have had properties sitting on their listings since the last quarter of 2007, some for longer. The estate agents are not moving houses, plain and simple, no matter how much they've been marking them down, and I've seen the prices decline every month since last October. The monthly real estate book is shrinking in page count because the market has been flat or in outright decline and the agencies are cutting back on advertising. More than half the legal notices we run every day now are foreclosures. If it weren't for the local Goodyear plant, this town would really be up shit creek.

Last year i wrote $5 million in mortgages and equities in Q1. I'll be lucky to hit $5 mil this year. Fortunately i've been doing a brisk business in $100,000 FDIC Cover your ass with another bank accounts to compensate.