United States GDP, Q2 2009 in at -1%

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):

GDP Q2 2009

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?

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GDP = Gov't Domestic Product

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?

I pulled in your comment

into the post.

Yeah, it's clearly not healthy at all, but we also need to look at the breakdown of Q1 2009.

That's the only good news, it's not "cliff diving" but this is consistent with what I've concluded so far, overall the "cliff dive" has stopped.

But....on the other hand we just had major revisions on Q1 and backwards, now twice what was originally reported as a decline....so it's possible this Q2 figure will be "revised" as well.

Another thing though is the imports, exports. Because they are a difference, they both can decline, which obvious implies a lot of companies are not making things globally but also clearly here in the U.S., but because the balance of decline has changed, i.e. imports declined more than exports, it "puffs up" the actual GDP number.

BTW: to post images you need the tag img, not embed.

I have correctors on the site to display things even when mistakes are made but I was surprised for the embed tag is something for flash movies.

A couple of reads

Firstly, feel validated, Econ Browser pretty much is saying what we are and goes into more analysis and also points to GDP elements which could, just by stopping the hemorrhage, make the GDP turn positive. So in other words, not real growth yet GDP would read positive.

Secondly, Krugman, he's trying to claim there isn't any anomaly with GDP to unemployment rate. That Okum's Law is holding just fine. Problem is, it looks like he's fudging the numbers trying to make it fit and that's with the new GDP revisions.

Oh, oh how so many try to deny trade, outsourcing, insourcing affects the middle class....

Tell Me Sweet Little Lies

I saw that post by Krugman and did you notice how many in the comments section called him out on it? To borrow a term from a transplanted Yank in Australia, the "bogosity" of information contained in the various government reports and the daily MSM is, in a word, Orwellian.

I found this chart showing GDP versus GDP without Government spending. It looks like the Govt. spending had approximately a +4% effect on 2Q Real GDP. One might say that this is exactly what a Keynesian stimulus is all about, right? However, we know that the stimulus expenditures have barely begun. The vast majority of the expenditures we are seeing relate to the various bailout programs of the Treasury and the FDIC. Unfortunately, these have had little, if any, effect on unemployment and the real economy. All they have done is change the solution to the GDP equation. . . which, along with $4, will get you a latte at your favorite cafe.

Also, I would like to mention that Glenn Greenwald has this very disturbing article this morning. It just goes to show how easily the news can be manipulated in our corporate owned MSM.

charts, krugman, corporate controlled media

Firstly, check over in the user guide on how to post images. You can do that in comments, where ever and I have the basic format. I notice you're having problems with that so lots of stop of EP to help with formatting. Rich-text editor has an image tool, just click on the icon when in it and put the URL where it says.

On Olbermann/O'Reilly I mean in all seriousness, can you take either of them seriously? I can't and have seen just incredible BS, not factual stuff (I mean who could have missed Olbermann's misogyny during the primaries?). Sometimes I turn on Glenn Beck just because to me it's comedy hour. I seriously laugh out loud watching it....

Then, CNN, they too do stories that are obvious pure ratings plays or worse, misinformation. Ali Velshi is the biggest hogwash artist I've seen in a while....did you see that during the initial TARP funds? He would shower the board with graphs and then report things that really made no sense whatsoever.

It was so bad, on EP, I literally put in some Michael Jackson keywords to see what happened. It increased the hits on those posts (which had nothing to do with Michael Jackson of course!) 10x.

I also tried posting a comment on Krugman's blog. They censor so much I'm surprised something got through. See if I can get one through this time.

So, what's our moral? We need more participation on EP, get more people looking at things from first principles, discussing, debating. So, when you see someone who has insight, or very good writers invite them over to participate.

What I see happening, at least on EP, is participation is down. It's like the world believes the MSM message that all is well, recession over, move along now, nothing to see.

So now we see posts on the most mundane, the most trivial, beer, the Gates "non-controversy" controversy (I mean, Good friggin' God, if they want to get into that one, try comparing the employment rates of blacks vs. India ethnicity as an example)....

meanwhile these major financial, economic structural reforms, actions.....oh yawn, no one is paying attention and one can guarantee in that case....nothing is going to happen.

I agree

When it comes to the news channels, I've practically given up. To be honest, it's all the same dribble. The same formula is used every time on these news channels when they get into politics. I mean, do you ever see them just report what is going on or are they always trying to get someone to put a spin on it. Most of this always seems to happen:

A) They get two people who obviously disagree with each other
B) They get someone who they think knows something about the topic because on another show or news article (or lately blog post) said something related
C) When they get "experts" on, it's either something resembling A) or some hack who is barely objective.
D) When there is an argument, it isn't on the merits of the thing at hand, but talk that degenerates into the same tactics 1)Lie, 2) Try and prove the other side is a hypocrite, 3) bring up something entirely different to prove that the other side is either lying or a hypocrite. I'm sure there are other tactics...oh wait forgot, they also tend to be discourteous by talking over each other. Honestly, it's like watching the little ones bicker over the Playstation.

Some of trader folks I know will have either bloomberg or CNBC or even Fox Business News on, but the volume on Mute. Actually, the growing trend is to turn it off unless the president or some major econ thing like Uncle Ben being on tv, otherwise the channel gets changed. Some have the weather channel (or weather network if you're in Canada), some history channel, or a ball game. As for me? Don't laugh, but I've found my zen through putting the tv on the Food Network.

The mainstream news is a major Fail in my book. Now Dan Rather wants the President to form a commission on how to "save it". He wants the White House to do something about the news. Frankly that would be troublesome, but I agree the news is completely dreck.



it's like mind numbing "ignore the facts" noise stream

Doesn't it just blow you away? Watching to much of it has to be bad for one's mental health. All of your observations, I can say, yes, yes, yes...it's not an information stream, it's a obfuscation, noise machine.

CNBC ratings are down 28%, which I guess is a good sign. I hope all of the cable TV heads get toasted for running "beer" and "Michael Jackson" and the beyond belief, beyond incredible either no information at all, or misinformation on health care reform. I mean this is major, difficult to track on the lobbyists, what's in the bills and you cannot get a fact out of that TV box to save your soul!

I have a question for you JV. When Exxon reported a 66% drop in profits, I checked ETF DUG, thinking for sure that would increase since it's a 2x ultra short and I believe Exxon is one of the biggest contributors...

yet it looks like "thack", no where. These ETFs, esp. those 2x ratios trackers Proshare has, sure look suspect on delivering what they peddle.

Regarding leveraged ETFs

Leveraged ETFs, well actually in many regards you could make the claim for certain sector ones as well, are not what they are peddled to be. You see, in order to get that fire power of 2X or even 3X, you have to take into account borrowing costs. Secondly, with regards to those leveraged funds that focus on the short side, they have to be able to borrow the stock to go short, naked sales are a big no no. Third, when you get a sector fund, sometimes the other stocks or a derivative would actually make a bigger influence than their largest holdings.

For example, lets look at DUG. DUG's info shows that oil service stocks make up 21% of the fund. DUG goes up when these oil stocks, be it drillers or servicer goes down. The thing is traders have known for a while now that XOM and CVX would show bad earnings, they priced oil from the high to the low on these stocks. They are now looking forward. Some moves from the other non-top two holdings could push the whole fund, but actually it's the main product, oil. Oil is guiding them, from the front month on up. What has oil done in the past several months, gone from the 30s to the 60s. A lot of trader talk is that the dollar is weakening (I know, on this site you had a piece with a chart making the claim there was no correlation, but tell that to the guys messing with XOM or DUG)and to them means higher oil prices.



this would make a useful post

I haven't posted a single thing on the ban on naked shorts or anything on ETFs.

But the issue with Proshare, DUG, GLD, etc. are they truly tracking 2x inverse the index? I haven't investigated in total but many times it just looked "funky" but I didn't calculate out the entire percentages, etc.

I believe I saw regulators considering shutting down some of these indexed ETFs due to the ability to short through an ETF and market distortions.

You're "the dude" maybe you can write something up on the latest with some of these SEC moves/issues?