Customize Consent Preferences

We use cookies to help you navigate efficiently and perform certain functions. You will find detailed information about all cookies under each consent category below.

The cookies that are categorized as "Necessary" are stored on your browser as they are essential for enabling the basic functionalities of the site. ... 

Always Active

Necessary cookies are required to enable the basic features of this site, such as providing secure log-in or adjusting your consent preferences. These cookies do not store any personally identifiable data.

No cookies to display.

Functional cookies help perform certain functionalities like sharing the content of the website on social media platforms, collecting feedback, and other third-party features.

No cookies to display.

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics such as the number of visitors, bounce rate, traffic source, etc.

No cookies to display.

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

No cookies to display.

Advertisement cookies are used to provide visitors with customized advertisements based on the pages you visited previously and to analyze the effectiveness of the ad campaigns.

No cookies to display.

Loading...
Chart Of The Day

A Closer Look at the GDP Report

Real GDP came in at 1.7% this morning which was better than expectations of  1.1%.  But the better than expected results came with some hefty revisions.  Last quarter’s 1.8% reading was revised down to 1.1%.   The gains in this quarter’s data continue to come from private investment which contributed 1.34% to the overall reading.  Personal consumption was weaker than Q1 at 1.2%.  Net exports dragged RGDP down by -0.8% and the government drag was a paltry -0.1%.  See the chart below for details.

I’ve really been hammering home the point about private investment since the beginning of the year in order to try to steer people away from the belief that the sequester and the government’s reduction in the deficit would derail the economy.  It’s better to look at the economy from the perspective of private investment and whether that component is being offset by other components.  Thus far in 2012 we’ve seen steady contributions from private investment and a drag from the government.  The overall result is still a growing economy even if it’s not booming.  In other words, as the Balance Sheet Recession ends and the private sector starts to re-lever, we’re seeing the private sector carry the load that the government has been carrying for the last 4 years.

More interesting is a closer look at private investment.  You might assume that the current improvement in private investment is due to real estate.  But it hasn’t been.  It’s actually come from the non-residential side.  Of the 1.34 point contribution residential was only 0.38.  In other words, lots of other parts of the economy are starting to pick up the slack on the private investment side.  This is not just a real estate recovery.

Overall, it’s not a great report and it’s not a terrible report.  It’s sort of what is to be expected in this sort of a muddle through environment where we’re crawling out of this huge debt hole and the private sector slowly regains its footing.  The big risk to the recovery still remains a sharp decline in the government’s deficit that is not offset by private investment.  I still don’t see that happening.  I think the sequester and the overall cuts ended up being much smaller than most expected.  We’ll see what happens with the next round of debt ceiling talks, but for now it looks like more muddle through where the private sector continues to gain its footing and the government eases off the gas.

Chart via Orcam Research:

GDP

Comments are closed.