I know it sounds like an oxymoron, but this number is actually better than expected news.
The estimates were -1.5%. From the BEA:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 1.0 percent in the second quarter of 2009,
(that is, from the first quarter to the second), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 6.4 percent.
Ok, now let's go digging into the details.
Firstly, what is GDP?
GDP = private consumption + gross investment + government spending + (exports − imports), or, GDP = C + I + G + (X − M).
So, why was the drop only -1% instead of the -1.5% expected?
According to the Wall Street Journal, private consumption, investment are still down, although minus housing, no where near as severe as last quarter.
So, where did the boost come from? A reduction in the trade deficit and government spending.
Trade acted as a boost to GDP in the second quarter, adding 1.38 percentage points. U.S. exports fell by 7.0% and imports decreased 15.1%.
Spending by the federal government in the second quarter rose 10.9%, after declining 4.3% in the first quarter.
Yet it is worthwhile to dig deeper into the net effect of the trade deficit, or returning to our equation, exports - imports. Both imports and exports are in decline, which implies our manufacturing sector is still at death's door.
Residential investment, dropped almost another 30%, so expecting to re-inflate the housing bubble to save the economy is none too wise.
What these numbers imply to me at least, your layperson blogger reading data sheets on the Internets,....is we need a manufacturing policy for that's where the real jobs will come from...ya know that long forgotten thing called the production economy.
Update: Naked Capitalism has a detailed post on all of the revisions on past GDP calculations....all going south. Good work NC, scouring the statistics.
Update2: MTGM weighs in:
Economic growth has now contracted for four straight quarters, the longest stretch since the government began keeping records more than 60 years ago and, aside from rising stock prices, it's hard to see what will drive the economy forward in the period ahead.
Update3: Commongood's comment pulled into post:
Take a look at this chart comparing Second Quarter US Real GDP Percentage Changes From Previous Quarter At Annual Rates (Source BEA) (h/t hellasious):
This is the AMERICA we currently live in. I guess you can say that it is less likely that the terrorists will come and attack us in our beds. But, does this look like a healthy economy to anyone? And what happens down the road when this game of borrowing from the future finally collapses?