GDP Review: How’s Our Economy ‘Really’ Doing?
Posted by Larry Doyle on July 30, 2014 9:45 AM |
Most pundits and analysts will understandably try to hype the better than expected 4% growth rate of 2nd quarter GDP reported this morning.
I get it.
Some might temper the hype by highlighting that growth in inventories accounted for approximately 1.7% of the growth. Others might choose to direct attention to the fact that the disappointing 1st quarter GDP was actually revised to a -2.1% level from the -2.9% posting previously reported. Still others will point toward the positive developments within the consumer spending data.
Yes, most of this information has a positive bent to it but is this to say that we have a meaningfully positive trending economy that will drive growth in full-time, high paying jobs?
Count me as suspect on that front.
The noise within the underlying components and the volatility of the revisions compels me to take a step back from a quarterly report so as to gain a wide-angled view of our overall economic health and well being.
While most if not all of our media outlets, market strategists, and Washington sycophants will try to ‘talk’ the economy up, who out there will inform you that full year growth for both 2011 and 2012 were revised meaningfully downward. Is that right? Yep, that’s right. How far downward? Check this out as reported by MarketWatch:
The increase in gross domestic product in 2011 was lowered to 1.6% from 1.8% and it was trimmed to 2.3% from 2.8% for 2012 . . . As a result of the changes, the economy expanded at a 2.0% rate from 2011 to 2013 instead of 2.2% as previously reported.
The negative revisions to full year GDP reports strikes me as standard operating procedure. Quarterly reports can and will generate some real volatility so as to make it challenging to ascertain how the economy is really doing.
But reflect on the fact that our economy generated a 2.0% growth rate from 2011 through 2013 and juxtapose that against the fact that as I highlighted one year ago this very week that our economy grew at a pathetic 1.8% growth rate from 2002 until 2012.
A 2% growth rate is now so deeply embedded in our economy and significant structural headwinds persist (deficit, entitlement programs, inefficient tax system, exploding student debts, unfunded pensions, dysfunctional government, cronyism and corruption) that the future of the American dream for so many in our nation is regrettably slipping further and further away.
That is how we are really doing.
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