GDP fell at a 0.9% annual rate in Q2.
Consumption rose a tepid 1.0%. Business fixed investment better than expected (-0.1%) but residential investment cratered (-14.0%).
Volatile factors subtracted (inventories -2.0pp contribution) & added (net exports +1.4pp contribution).
Consumption rose a tepid 1.0%. Business fixed investment better than expected (-0.1%) but residential investment cratered (-14.0%).
Volatile factors subtracted (inventories -2.0pp contribution) & added (net exports +1.4pp contribution).
I focus on final sales to private domestic purchasers (what I like to call PDFP) was unchanged at 0.0%.
In Q1 negative growth may have been mismeasured. And even if true was driven by volatile components.
Q2 appears to be quite weak, albeit a tad less than the headline.
In Q1 negative growth may have been mismeasured. And even if true was driven by volatile components.
Q2 appears to be quite weak, albeit a tad less than the headline.
Here is the big picture on GDP growth: in Q4 it was closing in on CBO's pre-pandemic forecast. But it has since fallen back and is 2.2% below now. But remember an alternative measure, GDI, is much stronger through Q1 (and not available yet for Q2).
Final sales to domestic purchasers (or PDFP = consumption + business fixed investment + residential investment) has been less volatile (which is why it's a better signal). It also rose faster in 2021 as demand outstripped supply (so consumption came from inventories & imports).
Now let's talk about prices. The worrying thing in these numbers is nominal GDP growth grew 7.8% pace, even faster than Q1 (but slower than previous year). Real GDP is not going to grow much more than 2% anytime soon so unless nominal slows a lot the high inflation will continue.
From 2021-Q4 to 2022-Q2 real GDP fell at a -1.3% annual rate.
Over the same period employment was up 4.0% annual rate (and aggregate private hours up 3.1%).
Huge decline in productivity, wrote about before.
Over the same period employment was up 4.0% annual rate (and aggregate private hours up 3.1%).
Huge decline in productivity, wrote about before.
BTW, business fixed investment surprised by being roughly flat (-0.1%). My estimate is that it was -0.6% excluding oiling&mining equipment&structures which I estimate rose at 14.0%.
Over last yr oil/mining up 15%. A lot but well below the pace the last time oil prices soared.
Over last yr oil/mining up 15%. A lot but well below the pace the last time oil prices soared.
Finally, an apology. Everything above is wrong. Every number. Every analysis. Sorry but not my fault--I'm working off the BEA's first estimate, which is their best guess given what they have.
Here's what it could look like 5+ yrs from now. 35% chance >0%. 10% chance <-3%.
Here's what it could look like 5+ yrs from now. 35% chance >0%. 10% chance <-3%.
P.S. Real GDP in 2022-Q2 was 2.2% below CBO's pre-pandemic forecast.
Residential investment was above forecast (it had been way above forecast before Q2), consumption roughly at forecast, and business fixed investment/govt below.
But biggest shortfalls were inventories & trade.
Residential investment was above forecast (it had been way above forecast before Q2), consumption roughly at forecast, and business fixed investment/govt below.
But biggest shortfalls were inventories & trade.
Loading suggestions...