Unexpectedly, Q2 GDP Estimates Revised Downward

I'd sure like an accounting of how they're computing these figures because they seem to perpetually show a bias in favor of higher GDP figures.

Q1 was already revised down from a so-so 3.1% down to a meager 1.3%. Wait a second, no it wasn't. It was already at a meager 1.3% and then revised down to a verge-of-recession 0.4%.

(By the way, these figures are annualized gross domestic product figures for the quarter. They represent, in theory, all productive activity in the US. They are annualized, which means when we offer a figure like "1.3%" we mean if the economy grew at this rate for the entire year rather than the three month, one-season snapshot we're actually looking at, it would be 1.3%. In other words, for the real growth (or contraction) that occurred in the quarter, divide by four. "Annualizing" the figure by multiplying by four is done for convenience, so we can compare a one-quarter rate to, say, the average yearly growth rate in the last 30 years (guessing, around 3.1%) and compare to that.)

The last quarter, Q2, was estimated to be 1.3%. It's now revised down to 1.0%, and that's even a bit lower than the downward revision "expected" by economic forecasters, down to 1.1%.

So we are actually officially on a recession watch.

The United States is on a recession watch after a massive sell-off in the stock market knocked down consumer and business sentiment. The plunge in share prices followed Standard & Poor’s decision to strip the nation of its top notch AAA credit rating and a spreading sovereign debt crisis in Europe.

While sentiment has deteriorated, data such as industrial production, retail sales and employment suggest the economy could avoid an outright contraction.

Ed notes there's one glimmer of good news--

There was one warning note: the core personal consumption expenditure index rose at 2.2%, faster than anything since 2009Q4, according to Reuters. That may be enough to keep the Fed on the sidelines, which we will know later today when Ben Bernanke gives a speech today on the economy and the Fed’s direction.

Yeah I don't really know what that means. I know the speed at which wealth is created is slowing to a crawl and the trend seems not your friend. Reports from the last snapshot generally show the economy deterioriating still further. There are almost no positive indicators whatsoever. So if the last half year was at an average of 0.7% on an annualized basis... well, it doesn't take too much further deterioration to bring that under 0.0% and kick off the actual second acknowledged (technical definition) recession.

Funny thing about recessions: Once they begin, economists tell you you've actually been in one for a half a year or full year. That's because once a technical recession (two back-to-back quarters of negative growth) begins, they date the recession as beginning from the last peak of economic activity.

That's why when the Bush recession hit in 2008 (if I'm remembering it right), economists then said we'd been in recession since sometime in 2007 (which was the last peak, after which later GDP figures were all lower).

In this case, if we fall into recession, it will be dated as having begun in the first quarter of 2010. (Note: I think. I don't know the details of how they date the onset of a recession.) Well before those awful Republicans even won the midterms, nevermind actually sat as a Congress and began to do things.

posted by Ace at 12:29 PM

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