Remember how I’ve been saying that I didn’t know what the Fed was smoking in predicting an annual 3% or better GDP growth for 2010? Turns that the Bureau of Economic Analysis now says that having my ear to the ground put me closer to the truth than the Fed’s models put them:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.6 percent in the second quarter of 2010, (that is, from the first quarter to the second quarter), according to the “second” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent.
The GDP estimates released today are based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 2.4 percent (see “Revisions” on page 3).
The increase in real GDP in the second quarter primarily reflected positive contributions from nonresidential fixed investment, personal consumption expenditures, exports, federal government spending, private inventory investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP in the second quarter primarily reflected a sharp acceleration in imports and a sharp deceleration in private inventory investment that were partly offset by an upturn in residential fixed investment, an acceleration in nonresidential fixed investment, an upturn in state and local government spending, and an acceleration in federal government spending.
As I pointed out yesterday, supporting consumer spending means that imports are going to increase.
A couple of things in this report pop out at me. First, that’s quite a revision. A difference of a third. I’ll refrain from expressing my emotional reactions to that. Second, note that government consumption and gross investment declined from the advance estimate. Doesn’t that mean that the CBO will need to revise their projections of the effect of fiscal stimulus downward, too? After all they’re measuring inputs rather than outputs and if the inputs weren’t as large as they presumably thought shouldn’t the outputs be lower?
Ugh.