The US economy grew a weaker than expected 1.3% vs the est of 1.8% AND Q4 GDP was revised to a gain of only .4% from the last reading of 1.9%. We thus grew less than expected off a smaller than expected baseline. The price deflator rose 2.3%, .3% more than expected, thus nominal GDP rose by 3.6%, vs the forecasted gain of 3.8%. The main drag was Personal Consumption which grew only .1%, the weakest since Q4 ’09 and was well below the est of a rise of .8%. This was mostly due to a drop in spending on auto’s/parts which we can partially attribute to the Japanese disaster. Government spending also was a drag, falling 1.1%, led by state and local. The positives were investment in equipment and software, non residential and residential construction. Trade also contributed to growth. Taking out the influence of inventories, Real Final Sales rose 1.1% after an unchanged reading in Q4. While headline PCE fell to 3.1% from 3.9%, the core rate rose 2.1% from 1.6%, the highest since Q4 ’09. Bottom line, the US economy grinded to an almost halt over the past 2 quarters, growing only .4% on a real basis from Q4 ’10 to Q2 and while Japan had an influence, it is not even close to explaining this weakness, especially at this point of the economic cycle. The market reaction in both equities and bonds to the number again points to the concerns about economic growth, much more so than political games of chicken.

Category: MacroNotes

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

4 Responses to “It’s the economy, stupid”

  1. willid3 says:

    lack consumer consumption combined with decline in government spending is killing the economy. since a lot state and local jobs are gone or are going, that is reducing consumer demand.

  2. JPBulkoMBA says:

    As the tepid economic “recovery” fizzles to a stall and an ideological civil war rages in Washington, millions and millions of otherwise hard-working Americans wonder if they will ever be employed again. Clearly, we need a jobs solution NOW! I have a plan to restore the U.S. economy to full employment. It’s a complex private-sector mechanism that involves giving another dose of financial nitroglycerin to Wall Street hoping that this time they won’t nuke the economy. In exchange, we get lots and lots of jobs. Read the plan here:

    Joseph Patrick Bulko, MBA

  3. Winston Munn says:

    The question is: how long does it take to retrain 10,000,000 former loan officers, appraisers, carpet salemen, electricians, plumbers, concrete workers, home improvement salespeople, real estate agents, loan processors, abstracters, and associated jobs and staff to be technologically proficient enough to be worthy of high-paying new jobs – even if such jobs exist?

    As it is now the best the middle class can hope for is to compete with India for $10 an hour call-center jobs. My name Peggy.