The Bureau of Economic Analysis has produced its first estimate of 2nd quarter 2012 growth in the United States. Expectations were for an increase of 1.2%; the BEA estimated an increase of 1.5%.
More interesting are the revised estimates for previous quarters and years. The first quarter’s growth was revised upwards slightly from 1.9% to 2%. 2009 growth was re-estimated upwards very slightly, 2010 growth re-estimated downwards very slightly, and 2011 growth upwards very slightly. From 2008 through 2011 real growth has increased an average of .3% per year. That compares with the longterm average real growth rate of 2%.
From an economic standpoint it’s increasingly clear that whatever they call what we’re in it’s actually an L-shaped recession. Real growth is all but flat and has been for the last three years. It’s similar to what Japan has experienced following its balance sheet recession, ongoing for twenty years. The traditional driver of economic recovery, housing, is no longer on the floor and a drag on GDP but it is unlikely that it will resume its importance in producing increased economic growth any time soon.
Politically, the news is not as bad as it might have been but the White House must surely have been hoping for something better. Many econometric models for predicting popular vote outcomes depend heavily on this BEA report. 1.5% growth means too close to call.
The upside, of course, is that the economy is not actually deteriorating. The downside is that it’s growing too slowly to bring the millions of unemployed back to work. Further, the emerging picture of economic activity in the U. S. undercuts the administration’s explanations of what happened somewhat: what really happened is that their policy responses were inadequate to the actual economic situation. The administration will, of course, continue to blame that on its predecessor but certainly that excuse must have a sell-by date which has already passed.
There’s an old engineering wisecrack: a pessimist says the glass is half empty; the optimist says the glass is half full; the engineer says you need a smaller glass. Unfortunately, we now have a smaller glass.
James Pethokoukis says that when you plug the latest GDP growth figures into Ray Fair’s econometric model of presidential popular vote outcomes, it predicts a Romney win:
And when you plug these new numbers into the election forecasting model of Yale University’s Ray Fair — assuming next quarter is no better than the past two — it shows a 4-point Mitt Romney victory over Barack Obama (in the two-party vote totals).
Dr. Fair should have an update of his election projection within the next few days. I’ll wait for that.