Last 10 Monthly Index Values
| Date: | 04/2011 | 05/2011 | 06/2011 | 07/2011 | 08/2011 | 09/2011 | 10/2011 | 11/2011 | 12/2011 | 01/2012 |
| Value: | 93.97 | 93.97 | 96.94 | 107.29 | 116.09 | 112.60 | 114.13 | 109.74 | 110.80 | 112.58 |
Consumer Metrics InstituteTMHistoric Charts and Commentary |
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| Date: | 04/2011 | 05/2011 | 06/2011 | 07/2011 | 08/2011 | 09/2011 | 10/2011 | 11/2011 | 12/2011 | 01/2012 |
| Value: | 93.97 | 93.97 | 96.94 | 107.29 | 116.09 | 112.60 | 114.13 | 109.74 | 110.80 | 112.58 |
| Consumer Metrics Institute's Contraction Watch(1): | ||
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| Notes: (1) The comparison of the 91-Day Growth Indexes during the 'quarter' immediately following the commencement of a contraction. The contraction events of 2008 and 2010 are shown against the same scale of annualized contraction. |
| Contraction Severity Gauge(2): | ||
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| Notes: (2) The number of percentage-days of contraction experienced during the 'Great Recession of 2007-2009' compared to the similar measure for the 2010 contraction. |
| Daily Growth Index Past 60 Days(1): | ||
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| Notes: (1) The daily values for the Consumer Metrics Institute's 91-day 'Trailing Quarter' Growth Index over the past 60 days. Please see our Frequently Asked Questions page for a more complete description of our Growth Index. |
| Growth Index -vs- Full GDP, Past 4 Years(2): | ||
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| Notes: (2) The Consumer Metrics Institute's 91-day 'Trailing Quarter' Growth Index -vs- BEA's Quarterly Full GDP Growth Rates over past 4 years. The quarterly GDP growth rates are shown as 3-month plateaus in the graph. The Consumer Metrics Institute's Growth Index is plotted as a monthly average. |
| BEA "Real" GDP -vs- BLS Deflated "Nominal" GDP, Past 4 Years(3,4): | ||
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| Notes: (3) Line items in the BEA's nominal GDP are deflated by either the Bureau of Labor Statistic's (BLS) CPI-U index or the BLS PPI index, according to whichever is most appropriate. (4) Note that when deflating the line items in the GDP tables from the BEA it is important to treat the "nominal" import and export data as the effective net "real" data -- since there are no offsetting domestic transactions carrying the correspondingly inflated or deflated prices (i.e., the one-sided net impact of inflating imported commodities is "real" to the economy). The net consequences of inflating import prices may become material in times of substantial and sustained trade imbalances. |
| BEA "Real" GDP -vs- BLS Deflated Per-Capita GDP, Past 4 Years(5): | ||
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| Notes: (5) Line items in the BEA's nominal GDP are deflated by either the Bureau of Labor Statistic's (BLS) CPI-U index or the BLS PPI index, and reported on a per-capita basis by using Census Bureau projected mid-quarter population data. |
| BEA "Real" GDP -vs- BLS Deflated Per-Capita Disposable Income, Past 4 Years(6): | ||
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| Notes: (6) Line items in the BEA's Disposable Personal Income report are deflated by the Bureau of Labor Statistic's (BLS) CPI-U index and reported on a per-capita basis by using Census Bureau projected mid-quarter population data. |
| BEA "Real" GDP -vs- BLS Deflated Per-Capita Proprietor Income, Past 4 Years(7): | ||
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| Notes: (7) The Proprietors' income (with inventory valuation and capital consumption adjustments) line from the BEA's Disposable Personal Income report are deflated by the Bureau of Labor Statistic's (BLS) CPI-U index and reported on a per-capita basis by using Census Bureau projected mid-quarter population data. |
 | January 27, 2012 - Headline 4Q-2011 GDP Growth of 2.75% Masks Mixed Signals: In their "Advance" estimate of the fourth quarter 2011 GDP, the Bureau of Economic Analysis (BEA) found that the annualized rate of economic growth had risen to 2.75%, up slightly less than one percent from their "final" estimate of 1.81% for the third quarter. However the details within the report actually contain a set of seriously mixed signals, with the entire gain concentrated in consumer goods and a huge swing in inventory levels. Those two line items represented an aggregate change of +4.30% relative to the growth rates reported for the third quarter. All of the other major line items were either static or deteriorated significantly, with the growth rates for consumer services, fixed investments and government all down sharply. Additionally, the prior two quarters of reprieve from the negative impact of foreign trade reversed -- with foreign trade now removing -0.11% from the headline number after contributing +0.43% last quarter. And the annualized growth rate of the BEA's "real final sales of domestic product" dropped by over 2% to 0.81%, hardly a ringing endorsement of economic recovery. Among the notable items in the report: -- The annualized growth rate for consumer expenditures for goods was sharply higher at 1.34%, up over one percent from the 0.33% rate reported for the third quarter of 2011. This is the second consecutive quarterly improvement in that line item, and it is consistent with the upswing in on-line demand for consumer goods that we have been following daily at the Consumer Metrics Institute since late in the second quarter of 2011. -- On the other hand, consumer services plummeted -- losing 0.80% as the growth rate fell to 0.10%. This is likely a sign of both dropping demand and eroding prices within the consumer services sector. This drop in the consumption of consumer services offsets the bulk of the increase in spending on consumer goods, with the aggregate contribution to the headline number ending up at only +0.21%. -- The growth rate of private fixed investments also dropped significantly to 0.41%, over 1% lower than the 1.52% annualized rate reported for the third quarter. -- The growth rate of inventories represented the true "wild card" in the report, swinging from a third quarter contraction rate of -1.35% to a newly reported growth rate of +1.94% -- a change of nearly +3.3% in its contribution to the headline number. This apparently wild swing could be the result of either real changes in inventory levels or phantom changes as commodity prices firmed inventory valuations after dropping dramatically during the third quarter. If the changes are real, it is likely that manufacturers were rebuilding inventories after being overly cautious during the third quarter, following their classic pattern of a lagging over-correction. In that scenario we should expect this line item to revert to long term trend lines during the first half of 2012, lowering the headline numbers at that time. However, if the numbers are the phantom result of changes in commodity pricing (particularly oil) impacting inventory valuations even as physical levels remain largely unchanged, then the headline number is largely meaningless and we can expect the quality of the GDP numbers to continue to be held hostage by the BEA's price deflaters. -- Another major swing in the numbers concerned total expenditures by governments at all levels, which is now contracting at a -0.93% annualized rate (a significant weakening from the -0.02% rate during the third quarter) -- a rate that continues a string of five consecutive quarters of contraction. It also reflects a change to annualized contraction at all levels of government (Federal, state and local) -- and most notably in Federal defense spending. -- The annualized growth rate of exports was unchanged at +0.64%. -- Imports are now removing -0.75% from the growth rate of the overall economy, a significant deterioration from the -0.21% rate reported for the third quarter. This is probably the result of both firming commodity prices and a reversal of any one-time effects from the Sendai Tsunami. -- The annualized growth rate of "real final sales of domestic product" plunged from +3.16% during the third quarter to only 0.81% in the fourth -- mostly as a consequence of the (possibly phantom) growth in inventories. -- Working backwards from the data tables, the effective "deflater" used by the BEA to offset the impact of inflation was an annualized 0.39%, much lower than the 2.57% rate used for the third quarter. As a reminder, a lower "deflater" will cause the "real" numbers to increase. In this particular case, however, the 0.39% rate used by the BEA is significantly higher than those provided by their sister agencies for the fourth quarter (particularly the -2.13% annualized change in the Bureau of Labor Statistic's CPI-U during the quarter). -- Real per-capita disposable income was unchanged from the third quarter. The Numbers As a quick reminder, the classic definition of the GDP can be summarized with the following equation: or, as it is commonly expressed in algebraic shorthand: In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows: GDP Components Table
Quarterly Changes in % Contributions to GDP
Summary Although the headline number of 2.75% certainly looks better than the prior quarter's 1.81% (and much closer to the growth rates of 3%-4% we might expect 11 quarters into a "recovery"), it turns out that the vast bulk of the improvement came from increasing inventory valuations -- a line item which by itself added nearly 3.3% to the headline number relative to the third quarter, over three times the aggregate headline improvement. Other observations include: -- Consumer spending on goods surged, but was largely offset as consumer spending on services sagged. The aggregate improvement of 0.21% in consumer spending was accomplished even as "real" per capita disposable income was flat, indicating that some of that improvement (particularly since it was focused on goods) may simply be retail sales brought forward as a consequence of deep holiday discounting on the part of retailers. -- The growth rate for fixed private investments dropped by well over a percent, to an anemic 0.41% annualized rate. Even as businesses grew their inventories they were moderating the growth of their capital investments. -- Governments at all levels contracted their expenditures. State and local governments spent less on both operating expenses and capital improvements, while the flood of Federal fiscal spending has clearly ebbed. Perhaps the most alarming line item (or perhaps cheering, depending on your point of view) was the -0.73% annualized contraction rate in national defense spending. Even given the state of politics in a Presidential election year, it is hard to imagine that trend reversing over the next few quarters -- especially when ongoing military draw-downs and the inertia of Federal budgets are taken into consideration. -- Imports reverted to historical form, probably as a result of both firming commodity prices and diminishing impacts from the Japanese tsunami. There is no reason to expect that part of the GDP equation to do anything but weaken the headline number in the quarters ahead. -- If the highly positive swing in the inventory number is real, it is certainly not sustainable -- and when combined with actual consumer spending the numbers themselves would be prima facie evidence that manufacturers over-corrected in anticipation of huge holiday spending. Such an over-correction should lead to reversals in the coming quarters. On the other hand, if the swing is an artifact of firming commodity prices it is just a further indication that the headline number is hopelessly noisy -- subject to erratic phantom movements as the BEA's "deflaters" struggle to track pricing changes. Despite the improved headline data, we're not convinced that there is much meaningful positive information in the latest GDP report. We believe that the improvements in consumer spending on goods is likely only a natural form of consumer self-medication for the malaise of extended "frugality fatigue" -- in this case enticed by massive retailer discounting during the fourth quarter. More importantly, those sales may have only pulled spending forward from the coming quarter. There has been no improvement in real per capita disposable income that could warrant any increase in consumer spending, and the fourth quarter splurge on goods is likely coming from a draw-down in savings, a partially offsetting decrease in spending on services and extra "pocket money" from lower at-pump gasoline prices. At a macro level those funding sources have been augmented by an enormous expansion of student loans and (for a non-trivial portion of all households) unprecedented rent-free living as a consequence of vastly extended foreclosure proceedings. With the exception of the rent-free and student loan components (for which there simply are no horizons or painless end-games), all of the probable sources for the increased consumer spending will probably revert to historical norms during 2012. And lastly, the volatility of the inventory parts of the BEA's equation continue to distort the headline number enough to render it useless as a source of genuine economic information. In the best of times the inventory data provided by the BEA is late and incomplete, but it is necessitated by the need within the BEA's equations to reconcile the production based manufacturing portions of their equation to the consumption based consumer portions. Because of that it is both partly plugged (at least in the monthly and quarterly updates) and highly susceptible to fluctuations in pricing levels. In short, this report is disturbing because of how the headline number masks real and troubling weakness in the more substantive details. Hopefully anyone trying to engineer the economy is basing their tinkering on better information than that provided by the BEA. In fact, it is likely that much of the negative consequences of the recent economic event can be attributed to precisely the poor quality and timeliness of the economic and monetary information available to those whose hubris drives them to such tinkering. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | December 22, 2011 - Third Quarter GDP Revised Downward Yet Again: In their third estimate of the third quarter 2011 GDP, the Bureau of Economic Analysis (BEA) revised the headline growth number downward once again to an annualized growth rate of 1.81%. This revision represents a drop in the reported growth rate of well over a half percent (-0.65%) from the BEA's original reading of the third quarter, now moving the latest growth rate closer to the second quarter's anemic 1.34% growth rate than the misleadingly optimistic numbers provided to us just two months ago. The bulk of the downward changes over the past two months have come from two factors: a much lower estimate for the consumption of consumer services and a greatly increased "draw down" of inventories. Exports were stronger than originally thought, and imports were shown to be weaker -- although in both cases the changes came at least partially from a fuller recognition of the stronger currency and weakening commodity prices (particularly oil). Meanwhile, the public's per-capita disposable income was still reported to be shrinking (at an annualized -1.9% rate), which does not bode well for the real economy moving forward. This revision to the prior month's report does not reflect actual changes in the economy, but rather another month's improvement in the BEA's understanding of what was happening in the prior quarter. But such revisions continue to tell us much about the timeliness of the BEA's data collection processes, and the quality of the data that we can expect from their earliest reports. Among the notable items in the report: -- Aggregate consumer expenditures for goods was revised slightly to a +0.33% annualized growth (previously reported to be +0.30%). -- The annualized growth rate for consumer services was revised sharply downward by -0.43%, and is now estimated to be at 0.90%. This is likely a sign of both dropping demand and eroding prices within the consumer services sector. -- The growth rate of private fixed investments was increased by 0.07%, with the new number coming in at 1.52%. -- The draw-down of inventories is now reported to be pulling -1.35% from the headline annualized growth rate. If that number is correct it implies that manufacturers were being extremely cautious during the third quarter -- tightening inventories in anticipation of a weakening economy and engineering better bottom lines as a consequence of the reduced production costs. It remains likely, however, that the inventory "draw down" is at least partially an phantom artifact of dropping commodity prices -- with the inventory valuations moving downward in concert with weakening prices even as physical inventory levels remained largely unchanged. -- Total expenditures by governments at all levels is reported to be very slightly contracting, continuing a string of four quarters of contraction. This number masks a duality between Federal and state and local spending levels, where Federal increases (primarily defense spending, which added 0.27% to the headline number) were more than offset by contracting state and local spending. Furthermore, for state and local governments "consumptive expenditures" (i.e., operating budgets) continue to drop sharply but are at least partially offset by increasing investments on infrastructure. -- Exports are now reported to be slightly higher relative to the previous estimate, raising the contribution that they made to the overall GDP growth rate to +0.64%. -- Imports are now removing -0.21% from the growth rate of the overall economy, nearly unchanged from the -0.24% rate reported for the second quarter -- which was supposedly a one-quarter suppression of imports as a consequence of the Sendai tsunami. -- The annualized growth rate of "real final sales of domestic product" was revised slightly to +3.16%, with the number that high largely as a consequence of the (possibly phantom) reduction in inventories. -- Working backwards from the data tables, the effective "deflater" used by the BEA to offset the impact of inflation was 2.57%, slightly higher than the previous report. Again, unlike past quarters this number is generally in the same ball-park as similar data from the BEA's sister agencies -- which have more tightly tracked the volatility of gasoline and grocery costs over the past year and a half. Substituting the line-item appropriate (CPI or PPI) current inflation rate published by the Bureau of Labor Statistics (BLS) causes the "real" GDP to be growing at a 2.32% annualized growth rate, more than a half percent higher than the official headline rate. -- Perhaps the most negative item in the report concerns per-capita disposable income, which is now reported to have been shrinking at an annualized -1.9% rate during the third quarter. The Numbers (as Revised) As a quick reminder, the classic definition of the GDP can be summarized with the following equation: or, as it is commonly expressed in algebraic shorthand: In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows: GDP Components Table
Quarterly Changes in % Contributions to GDP
Summary This report continues a tendency of the BEA to revise their previously published data downwards, and it brings their "final" reading for the economy's annualized growth rate for the third quarter of 2011 (now reportedly 1.81%) far closer to the anemic data for the first two quarters of 2011 (0.36% and 1.34% respectively) than to the highly optimistic 2.46% headline that they generated just two months ago. This report, even if taken at face value, is sobering for a number of reasons: -- A headline number of 1.81% is disappointing given that we are now six quarters into a "recovery," when numbers closer to 4% should be expected. -- Federal fiscal spending continued to sustain the headline number, with defense spending contributing more than a quarter of a percent. Any successful efforts to restrain the deficit will have direct and immediate impact on these numbers. -- The contracting per-capita disposable income explains the public's mood, even if consumers are seemingly "self-medicating" their psyches through increased (and perhaps ill-considered) holiday spending. -- When compared to earlier data for the same quarter, this set of revisions again tells us that the BEA has been chronically misreading the economy with an optimistic bias (best exemplified by the massive downward revisions to the numbers for the "Great Recession" this past July). If the Federal Reserve continues to believe that it can and should "engineer" the economy for happier outcomes, we hope that their tinkering is informed by better and more timely data than that provided by the BEA. Given the recent tendencies of the BEA to eventually revise weak data even lower -- and especially in such cases as the first two quarters of 2011, when they have used badly lagging deflaters -- we see no reason to believe that the actual U.S. economy during 2011 experienced any meaningful growth. Coupled with shrinking per-capita "real" disposable income and the likelihood of curtailed defense spending, we find the prospects for a happy new year to be far less than we might have wishe | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | November 22, 2011 - Third Quarter GDP Revised Downward: In their second estimate of the third quarter 2011 GDP, the Bureau of Economic Analysis (BEA) revised the headline growth number downward by over a half percent to an annualized growth rate of 2.01%. The real story within the data, however, was that compared to last month's "Advance" estimate the new report showed substantially weaker commercial fixed investments while the draw-down of inventory levels was more intense -- putting the new numbers for third quarter aggregate commercial GDP into net contraction. In general consumer contributions were slightly weaker, while a substantial downward revision in imports somewhat softened the bad news in the headline number. Meanwhile, the public's per-capita disposable income continued to shrink -- but at a newly revised and sharply greater rate. As usual, this revision to the prior month's report does not reflect actual changes in the economy, but rather a month's improvement in the BEA's understanding of what was happening in the prior quarter. As such it tells us as much about the BEA's "guesstimating" processes as it does about the economy. Among the notable items in the report: -- Aggregate consumer expenditures for goods was revised downward slightly to a +0.30% annualized growth (previously reported to be +0.35%). -- The annualized growth rate for consumer expenditures was also revised downward by 0.05%, and is now estimated to be at 1.33%. -- The growth rate of private fixed investments was lowered by 0.15%, with the new number coming in at 1.45%. -- The draw-down of inventories is now nearly a half percent worse than previously reported, pulling -1.55% from the headline annualized growth rate. Conventional wisdom is that this bodes well for the economy in the future, since production will presumably have to eventually ramp-up to replace that lost inventory. But in fact there are a number of wildly conflicting ways to spin this inventory number: -- Production has lagged demand, with factories struggling to keep up with increasing demand (unfortunately implausible given the anemic consumer growth numbers mentioned above); -- Factories are reducing inventories in anticipation of weakening demand (plausible); -- Inventory levels were ridiculously high to begin with (implying that much of the "recovery" was wishful thinking; again plausible); -- Factories have simply cut production costs by cutting production levels (thereby inflating bottom lines without the benefit of increasing commerce; highly plausible); -- Or our favorite: the BEA's deflaters have shot them in the foot again (with deflating commodity prices "shrinking" inventories even as physical inventories remain largely unchanged; also highly plausible). Of the five spin scenarios outlined above, the only positive one is also the least plausible. -- Total expenditures by governments at all levels is now reported to be very slightly contracting, continuing a string of four quarters of contraction. This number masks a duality in state and local spending levels, where "consumptive expenditures" (i.e., operating budgets) continue to shrink but are partially offset by increasing investments on infrastructure. -- Exports are now reported to be slightly higher relative to the previous estimate, raising the contribution that they made to the overall GDP growth rate to +0.58%. -- Imports dropped substantially compared to the previous "Advance" report, and are now removing only -0.09% from the growth rate of the overall economy (previously this number was -0.34%, a full quarter of a percent worse for the headline number). -- The annualized growth rate of "real final sales of domestic product" was revised up slightly to +3.56%. This was the result of the higher draw-down of inventories offsetting the generally weaker numbers shown elsewhere. -- Working backwards from the data tables, the effective "deflater" used by the BEA to offset the impact of inflation was 2.49%, essentially unchanged from the previous report. Again, unlike past quarters this number is generally in the same ball-park as similar data from the BEA's sister agencies -- which have more tightly tracked the impact of gasoline and grocery costs over the past year and a half. Substituting the line-item appropriate (CPI or PPI) current inflation rate published by the Bureau of Labor Statistics (BLS) causes the "real" GDP growing at a 2.46% annualized growth rate, somewhat higher than the official headline rate. -- Perhaps the most negative item among the revisions is in per-capita disposable income, which was revised sharply downward and is now reportedly shrinking at an annualized -2.1% rate during the third quarter (revised from a -1.7% in the previous "Advance" estimate). If you are looking for one line item that largely explains the mood of the general public, this is the one to monitor. The Numbers (as Revised) As a quick reminder, the classic definition of the GDP can be summarized with the following equation: or, as it is commonly expressed in algebraic shorthand: In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows: GDP Components Table
Quarterly Changes in % Contributions to GDP
Summary This report does not bode well for a number of reasons: -- The headline number, at face value, is anemic -- especially given that we are now six quarters into a "recovery," when numbers well north of 3% should be expected. -- When compared to month-earlier data, this set of revisions again tells us that the BEA has initially been misreading the economy with an optimistic bias. This follows a trend that is best exemplified by the massive downward revisions to the numbers for the "Great Recession" announced by the BEA this past July. The problem, of course, is that it is not just the public that looks at this data -- in principle the data exists primarily to inform policy makers. We're not sure that it is in the best interests of the economy to have policy makers always looking through rose tinted glasses. -- The numbers would be worse if not for a substantial drop in the impact of imports. Weakening consumption of imported goods may be positive for the BEA's massive GDP spreadsheet, but we're not convinced that it signals a strong economy either domestically or globally. -- The contracting per-capita disposable income not only explains the public's mood, it is a bad omen for holiday spending and any hope that this "recovery" (such as it is) has long to live. In short, the BEA reports that growth is poor by historical "recovery" standards and that consumer disposable income is contracting at a significant rate. And other factors in the report (including weakening demand for imported goods and factories lowering inventory levels) indicate that overall levels of commerce are not nearly as good as the headline number might indicate. This is neither a ringing endorsement of an ongoing "recovery" nor an sign that consumers will be the engine of organic growth necessary to sustain one. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | October 27, 2011 - GDP Improves Dramatically: The Bureau of Economic Analysis's (BEA) first ("Advance") estimate of third quarter 2011 U.S. Gross Domestic Product (GDP) was reported to be 2.46%, nearly twice the rate reported for the second quarter. The improvements were broadly spread across all sectors of the economy, with consumer goods and services showing the greatest strength. Even the contraction in governmental spending that had been a fixture of the prior three quarters subsided, and the increasing rate of inventory draw-downs indicates that supply chains were struggling to keep up with consumers. Among the notable items in the report: -- Aggregate consumer expenditures for goods flipped from prior quarter contraction (-0.38%) to slight growth (now reported to be +0.35%). -- The growth of consumer expenditures for services was substantially stronger during the quarter, at an improved (yet arguably still modest) 1.38% annualized growth rate. Between them, the consumer improvements in expenditures for both goods and services were large enough to generate the entire growth in the headline number. -- The growth rate of private fixed investments was also reported to be improving, with the annualized growth rate now reported to be 1.60%. -- The draw-down of inventories accelerated during the quarter, indicating that production has lagged demand. This change may be a good sign for the overall health of the economy, and the lower inventory levels may signal the need for increasing factory activities in the near future. -- Total expenditures by governments at all levels flattened out, breaking a string of three prior quarters of contraction. The changes were primarily at the state and local levels, where "consumptive expenditures" (i.e., operating budgets) continued to shrink but were offset by increasing investments on infrastructure. -- Exports strengthened slightly relative to the second quarter, raising the contribution that they made to the overall GDP growth rate to 0.55%. -- Imports also increased somewhat when compared to the prior period, and are now removing -0.34% from the growth rate of the overall economy. The combination of the revisions in the import and export numbers nearly offset each other and made a miniscule -0.03% downward change in the published headline number. -- The annualized growth rate of "real final sales of domestic product" was sharply higher at 3.54% -- more than double the 1.62% annualized rate recorded for the second quarter. This was the result of the higher consumer expenditures for both goods and services, and the increased draw-down of inventories. -- Working backwards from the data tables, the effective "deflater" used by the BEA to offset the impact of inflation was 2.52%, essentially unchanged from the second quarter. In a significant shift from prior reports this number is higher than similar data from the BEA's sister agencies -- which have more tightly tracked the impact of gasoline and grocery costs over the past year and a half. Substituting the line-item appropriate (CPI or PPI) current inflation rate published by the Bureau of Labor Statistics (BLS) causes the "real" GDP growing at a 2.94% annualized growth rate, slightly higher than the headline rate. This reverses two prior quarters where a BLS price-deflated GDP was actually in contraction. -- The only really negative data in the report relates to per-capita disposable income, which was reportedly shrinking at an annualized -1.7% rate during the third quarter (and a -2.32% annualized rate using the BLS CPI as a deflater). This one line item largely explains the mood of the general public, since these per-capita numbers are what impacts individual Americans and are the real source of the frustration within the populace. The Numbers (as Revised) As a quick reminder, the classic definition of the GDP can be summarized with the following equation: or, as it is commonly expressed in algebraic shorthand: For the first quarter of 2011 the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows: GDP Components Table
Quarterly Changes in % Contributions to GDP
Summary The improved numbers in the consumer sector were much stronger than consensus expectations, although to a large extent they only mirrored our data at the Consumer Metrics Institute -- which had been showing dramatic improvements in on-line consumer demand for discretionary durable goods since our indexes bottomed in late May. The improved numbers also seem to have caught the factories off guard, and the rapid draw-down in inventories should improve corporate bottom lines later this year. But as good as the numbers are for 3Q-2011 -- and they are broadly stronger across nearly all segments of the economy -- it is important to keep a 2.46% annualized growth rate in perspective. If the economy is now in the tenth quarter of "recovery" from the "Great Recession" we might expect something much stronger. On the other hand this headline number is probably high enough to ward off further Quantitative Easing experiments by the Federal Reserve -- since it is certainly not prima facie evidence of a need for even more desperate monetary or fiscal actions by government, even if the growth rate remains sluggish by historical "recovery" standards. And perhaps most importantly, the restive public saw their per-capita slice of the pie shrink yet again. This report certainly makes for good headlines and provides ample material for positive political spin. But we expect that the mood of most Americans will be one of disbelief -- especially with regard to their household budgets and employment prospects. The dramatic changes in consumer spending during the third quarter are most likely directly tied to moderating gasoline and grocery prices -- not fundamental changes in household disposable income or wealth. Until those start to improve (and unemployment numbers drop sharply) we don't expect this upward bounce to have real legs. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | September 29, 2011 - BEA Adjusts Second Quarter GDP Growth Rate Upward: The Bureau of Economic Analysis's (BEA) third estimate of second quarter 2011 U.S. Gross Domestic Product (GDP) was reported to be 1.34%, an upward adjustment from their previous data. The new growth number was .36% higher than the number reported last month for the same quarter. It is important to remember that this new monthly report covered the same time periods as the previous reports -- meaning that this monthly set of changes in the numbers was caused by late arriving data at the BEA and not actual month to month improvements in the economy. Among the items notable in the report: -- Aggregate consumer expenditures for goods was still reported to be contracting during the second quarter, dragging the overall growth rate of the economy down by a -0.38% rate. This is actually marginally weaker than the numbers in the earlier reports. -- Consumer expenditures for services grew slightly during the quarter, at an improved (although still very sluggish) 0.87% annualized growth rate. But the adjustment in this single line item represented the bulk of the improvement in the headline number. -- The growth rate of private fixed investments was only slightly higher, at a weak annualized 1.07% rate. -- Inventories are still reported to have been drawn down during the quarter, indicating that production has slowed faster than demand. The revised estimate of inventory levels caused the overall growth rate to be reduced by a -0.28% annualized rate. -- Total expenditures by governments at all levels was still reported to be shrinking, reducing overall economic activity at a -0.18% annualized rate. -- Exports strengthened slightly relative to the earlier report, raising the contribution that they made to the overall GDP growth rate to 0.48%. -- Imports decreased somewhat when compared to the earlier report, and are now reported to be removing -0.24% from the growth rate of the overall economy. The combination of the revisions in the import and export numbers contributed about half of the upward changes in the published headline number. -- The growth rate of "real final sales of domestic product" was revised upward to an annualized 1.62%, as the result of the now higher consumer services figures, slightly improved foreign trade and the increased draw-down of inventories. -- Working backwards from the data tables, the effective "deflater" used by the BEA to offset the impact of inflation was 2.58% -- still substantially below the rates reported by their sister agencies. Substituting the line-item appropriate (CPI or PPI) current inflation rate published by the Bureau of Labor Statistics (BLS) causes the "real" GDP to be contracting at a -0.73% annualized rate. -- And using the same alternate BLS "deflaters" the real per-capita GDP can be shown to be contracting at a -1.45% annualized rate. Similarly, per-capita disposable income was contracting at a -0.92% annualized rate. These per-capita numbers are what impacts individual Americans and it is the real source of the frustration within the populace. The Numbers (as Revised) As a quick reminder, the classic definition of the GDP can be summarized with the following equation: or, as it is commonly expressed in algebraic shorthand: For the first quarter of 2011 the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows: GDP Components Table
Quarterly Changes in % Contributions to GDP
Summary Even at face value the reported 1.34% growth rate is either sluggish or pathetic, depending on your chosen inclination to spin. When a more reasonable "deflater" is used to calculate the "real" numbers, the second quarter is actually shown to be in contraction. And when using such alternative BLS inflation data the most recent past quarter is the 2nd consecutive "real" quarter to have such negative growth -- meeting one of the common definitions of a new recession. The restive public clearly understands this -- even if the academicians at the BEA don't. The public has been seeing their (per-capita) "slice of the pie" contract now for six months, and no amount of well spun "sluggish growth" can alter their view of a shrinking reality. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commentary Date | Commentary Title | ||
|---|---|---|---|
| 2012-01-27 | January 27, 2012 - Headline 4Q-2011 GDP Growth of 2.75% Masks Mixed Signals | ||
| 2011-12-22 | December 22, 2011 - Third Quarter GDP Revised Downward Yet Again | ||
| 2011-11-22 | November 22, 2011 - Third Quarter GDP Revised Downward | ||
| 2011-11-11 | November 11, 2011 - Absolute Demand Index Plummets as Disposable Income Contracts | ||
| 2011-10-27 | October 27, 2011 - GDP Improves Dramatically | ||
| 2011-10-12 | October 12, 2011 - What's Going On? | ||
| 2011-09-29 | September 29, 2011 - BEA Adjusts Second Quarter GDP Growth Rate Upward | ||
| 2011-09-27 | September 27, 2011 - Chart Updates | ||
| 2011-09-16 | September 16, 2011 - Data Update and the Sticky Jobs Situation | ||
| 2011-09-09 | September 9, 2011 - Persistent Questions | ||
| 2011-08-30 | August 30, 2011 - Has the BEA Already Documented the Second Dip? | ||
| 2011-08-26 | August 26, 2011 - BEA Lowers Second Quarter GDP Growth Rate to Below 1% | ||
| 2011-08-24 | August 24, 2011 - Update on Our Indexes | ||
| 2011-08-15 | August 15, 2011 - Daily Growth Index Surge Continues; But Why? | ||
| 2011-08-05 | August 5, 2011 - Special Update: Daily Growth Index Breaks Positive | ||
| 2011-08-04 | August 4, 2011 - The BEA Revisions Revisited | ||
| 2011-08-02 | August 2, 2011 - New Index & Housing Data | ||
| 2011-07-29 | July 29, 2011 - BEA Reports 1Q-2011 and "Great Recession" Far Worse Than We Were Previously Told | ||
| 2011-07-23 | July 23, 2011 - Unexpected Extremes & Mussolini Revisited | ||
| 2011-07-16 | July 16, 2011 - Weighted Composite Index Continues to Strengthen | ||
| 2011-07-09 | July 9, 2011 - Continuing Contraction Moderation; Shakespeare's Stimulating Idea | ||
| 2011-07-02 | July 2, 2011 - Upturn in Daily Growth Index; Stimulating Despite Demographic Dilemmas | ||
| 2011-06-24 | June 24, 2011 - The BEA's Third (and "Final") Estimate of First Quarter 2011 GDP | ||
| 2011-06-21 | June 21, 2011 - Updating the Impact of Strategic Defaults | ||
| 2011-06-15 | June 15, 2011 - Keeping Perspective and Strangulation by Regulation | ||
| 2011-06-05 | June 5, 2011 - Bottom Bouncing and Scholarly Debt End-Games | ||
| 2011-05-26 | May 26, 2011 - The BEA's Second Estimate of First Quarter 2011 GDP | ||
| 2011-05-20 | May 20, 2011 - A Pause in the Ongoing Contraction; Incorporating Debt/GDP End-Games | ||
| 2011-05-14 | May 14, 2011 - Continued Weakness in Consumer Demand; Unthinkable De-Financialization | ||
| 2011-05-05 | May 5, 2011 - Resumed Downturns, Retail Sales and Consumer Confidence | ||
| 2011-04-29 | April 29, 2011 - Bottoming at New Record Lows, Plus Debt/GDP End-Games via Insurrection | ||
| 2011-04-28 | April 28, 2011 - The BEA's Advance Estimate of First Quarter 2011 GDP | ||
| 2011-04-21 | April 21, 2011 - Making Sense of Our Indices, Plus Regime Changing Debt/GDP End-Games | ||
| 2011-04-16 | April 16, 2011 - New Records and "Unthinkable" Sovereign Debt End-Games | ||
| 2011-04-12 | April 12, 2011 - Updated Charts and Mr. Bernanke's Dilemma | ||
| 2011-04-10 | April 10, 2011 - Retail Sales and Credit Expansions | ||
| 2011-04-05 | April 5, 2011 - Automotive Euphoria; Sovereign Debt End-Games | ||
| 2011-03-31 | March 31, 2011 - Continued Weakness; Divergences Revisited | ||
| 2011-03-25 | March 25, 2011 - The BEA's Third Estimate of Fourth Quarter 2010 GDP | ||
| 2011-03-23 | March 23, 2011 - Data Update; Sendai and Japan's Wealth -vs- GDP | ||
| 2011-03-22 | March 22, 2011 - News and the Consumer, Reflections on Chernobyl and the Economy | ||
| 2011-03-19 | March 19, 2011 - News and the Consumer, Bad Instruments and Chernobyl | ||
| 2011-03-13 | March 13, 2011 - Glaring Disconnects and Tsunami Riding Black Swans | ||
| 2011-02-25 | February 25, 2011 - Inside the BEA's New Lower Estimate of 4Q-2010 GDP Growth | ||
| 2011-02-23 | February 23, 2011 - Recent Downturns in Our Indexes & the Fallacy Revisited | ||
| 2011-02-16 | February 16, 2011 - Our Current Outlook and Bastiat's Broken Window | ||
| 2011-02-09 | February 9, 2011 - An Update Plus Mid February Odds and Ends | ||
| 2011-02-07 | February 7, 2011 - Measuring the Impact of "Strategic Defaults" and Mortgage Delinquencies on Consumer Spending | ||
| 2011-02-02 | February 2, 2011 - Answering More Questions about the Q4-2010 GDP Report (Ad Nauseam) | ||
| 2011-01-30 | January 30, 2011 - More Thoughts on the BEA's "Advance Estimate" for 4Q-2010 | ||
| 2011-01-29 | January 29, 2011 - What the BEA's Advance Estimate of Fourth Quarter 2010 GDP Was Really Telling Us | ||
| 2011-01-12 | January 12, 2011 - Reflecting Back on 2010 | ||
| 2011-01-10 | January 10, 2011 - Lessons from 2010 | ||
| 2010-12-29 | December 29, 2010 - Looking Back at Holiday Sales and the BEA's Third Estimate for Q3-2010 | ||
| 2010-12-14 | December 14, 2010 - Feeding the Holiday Sales Frenzy While Maintaining Perspective | ||
| 2010-12-07 | December 7, 2010 - Retail Updates, The Full Economy & GDP Revisited | ||
| 2010-12-01 | December 1, 2010 - "Black Friday" and "Cyber Monday" | ||
| 2010-11-23 | November 23, 2010 - First Revision to the Third Quarter GDP | ||
| 2010-11-22 | November 22, 2010 - Continued Modest Improvements in Our Weighted Composite Index | ||
| 2010-11-14 | November 14, 2010 - What Does the Bottom in the Daily Growth Index Mean? | ||
| 2010-11-09 | November 9, 2010 - Daily Growth Index Shows Signs of Bottom Forming | ||
| 2010-11-07 | November 7, 2010 - Revisiting the Character of the "Great Recession" | ||
| 2010-10-31 | October 31, 2010 - The End of Political "FUD" Approaches | ||
| 2010-10-29 | October 29, 2010 - Inside the Third Quarter GDP Release | ||
| 2010-10-25 | October 25, 2010 - Current Contraction Surpasses "Great Recession" | ||
| 2010-10-24 | October 24, 2010 - The U.S. Census Bureau's Retail Sales Report | ||
| 2010-10-17 | October 17, 2010 - Political "FUD" and the Consumer Psyche | ||
| 2010-10-10 | October 10, 2010 - Daily Growth Index Sets Record Low and Duration Marks | ||
| 2010-10-05 | October 5, 2010 - Inside the September GDP Revisions | ||
| 2010-10-03 | October 3, 2010 - Weakening Weighted Composite Pulls Daily Growth Index to All-Time Low | ||
| 2010-09-26 | September 26, 2010 - The Diverging GDP | ||
| 2010-09-22 | September 22, 2010 - NBER: Double Dip or Banana Split? | ||
| 2010-09-20 | September 20, 2010 - Thoughts on the Recent "Bottom" in our Weighted Composite Index | ||
| 2010-09-18 | September 18, 2010 - Has the Bottom Been Reached? | ||
| 2010-09-11 | September 11, 2010 - The Big Scoop and Housing | ||
| 2010-09-02 | September 2, 2010 - Autos, Personal Finance, and Refinancing | ||
| 2010-09-01 | September 1, 2010 - Viewing the "Great Recession" in Hi-Def | ||
| 2010-08-30 | August 30, 2010 - Taking a Closer Look at the "Great Recession" | ||
| 2010-08-28 | August 28, 2010 - Inside the BEA's Latest GDP Numbers | ||
| 2010-08-22 | August 22, 2010 - 75 Days of Fear, Uncertainty and Doubt | ||
| 2010-08-20 | August 20, 2010 - Politics and the Economy; Cause and Effect |
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| Economic Data for the 21st Century - Part 1 (Duration 7:35) | |
| Economic Data for the 21st Century - Part 2 (Duration 11:35) |
