GDP Scrutinized

GDP a very popular topic this weekend, with Zero Hedge's contribution my fave;"A Realistic Look At GDP"

The backward revision economic data train continues, this time in GDP, which came in at a "better" than expected 1% while the prior quarterly data was adjusted significantly downward from -5.5% to -6.4%. Additionally, per a brand new revision to the way GDP data is presented, the GDP decline demonstrated over the past year is now the largest since World War II. Current quarter jiggering aside, downward revisions to prior quarters have left the decline in real GDP at -3.9% in the year through Q2. And to demonstrate, the severity of this downturn, the Q2 data concluded the first three-quarter consecutive period of falling GDP since 1953-1954.
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And Econbrowser's

"Been down so long it looks like up"

In terms of specific factors contributing to the 2009:Q2 growth rate, consumption spending, housing, nonresidential fixed investment, inventory change, and exports each subtracted almost 1%-- had it not been for the positive contribution from falling imports and increasing government spending, the Q2 number would have been -4.3% instead of -1%. Should we be cheering the fact that falling imports were a key factor preventing GDP from declining even more? Falling U.S. imports can create problems for those countries trying to export to us and are a symptom of a very weak U.S. economy. But lower U.S. imports are a necessary element of our longer run adjustment process, and indeed, if the increase in U.S. private saving were just matched by the decrease in U.S. imports, we'd be exactly where we want to be in both the short and the long run.


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