The economy grew at a 0.4% (annual rate) in Q2. That follows 0.1% growth in Q1. This is consistent with some of the easing of the recession fears lately and somewhat better than what it looked like a month ago when we only had expenditure data available.
Note that the previous tweet reported the average of GDP & GDI. That is the most accurate estimate of "THE growth rate" published by the BEA so that is what I'm headlining.
Most others would report just GDP growth, which was -1.6% in Q1 and -0.6% in Q2.
Most others would report just GDP growth, which was -1.6% in Q1 and -0.6% in Q2.
GDP and GDI (two different ways to measure the same concept, the first adding up total final spending and the second all incomes like wages and profits), have had a record divergence. That widened still further in Q2 with GDI showing growth and GDP showing contraction.
Stay tuned for more analysis and charts on this thread.
Overall GDP in Q2 was 2.2% below CBO's pre-pandemic forecast. That could indicate lingering effects of the pandemic. Or it could just be mismeasurement: using the average of GDP and GDI the economy is right where CBO expected it to be.
Using the expenditure components, the biggest source of the shortfall is the that non-residential fixed investment (or business fixed investment) remains way below what CBO thought it would be.
Here are 3 different measures of the labor share of income: the one reported by BLS for non-farm business (is up a lot), the compensation share of national income (roughly flat) & the compensation share of corporate net value added (so subtracting depreciation), (is down).
Willie and I discussed the fact that unit labor costs are outpacing price growth in this piece, raises the possibility that prices could rise more to catch up to compensation growth.
piie.com
piie.com
Finally, just based on the historical GDP revisions alone (and ignoring GDI), here is the probability distribution we should expect for the eventually revised GDP estimate for Q2.
About a 20% chance it is worse than -2%. And 34% chance it is positive.
About a 20% chance it is worse than -2%. And 34% chance it is positive.
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