Reclaiming Common Sense

Last year the GDP data was revised back to 1929.

This year the data was revised back to 2014.

The Gross Domestic Product, or GDP, has three values: The Annualized (quarter to quarter) growth and the Same Quarter Growth rate, and the end of the year annual rate of growth. Former President Obama is the only President to never have a end of year growth rate of 3.0%. Last July when the annual revisions to the GDP were performed the data was revised back to 1929. This year the data was revised back to 2014. The GDP value for 2015 was 2.9%. Did former President Obama finally get his 3.0%? Did the Annualized GDP rise from Q1 to Q2 as it normally does rise? Did we see the same quarter GDP break through 3.00? There were some surprises in the Advance Second Quarter GDP report.

There were substantial revisions to the data from 2014 through 2019 first quarter. Last Year the GDP data was revised back to 1929. This column produced an article last July titled "Giddy GDP. The reason the revisions are important is because former President Obama never had a 3.0% end of 's year growth rate for any of his eight years in office. His best year was 2015. Let's look at the data:

There is no link for the 2019 version of the report because the report only publishes from 2015Q3 to date.  You have to go to the revisions section of the report. It is interesting to note that there is information on the quarter to quarter revisions, not the same quarter revisions.

The headline annualized GDP growth was 2.1%. This "beat" expectations from most, who were expecting 1.5% plus or minus. This was a slower growth rate than 2017Q2 and much slower than 2018Q2. It was slower than 2019Q1. What is interesting to note is that we supposedly had 5.5% annualized growth during 2014q2. This is an upward revision from 5.1% as reported prior to the revisions. The 2014Q3 data was also revised to a 5.0% level, up from 4.9%. The data from 2014 and 2016 were revised higher than last reported while the 2017 was revised lower.

Where was the growth? Last quarter all sectors added to the annualized GDP. That did not happen this quarter  Personal Consumption expenditures (PCE) increased 4.3%. with Durable goods spiking 12.9%. Gross Private Domestic Investments (GPDI)  fell by 5.5%, with structures falling 10.6% an Net Exports fell 5.2%. Goods fell 5.0% and services fell 5.6% for exports. Government Consumption expenditures rose by 5.0%

What were the quarter to quarter contributions to GDP? PCE added 2.85% to the 2.1% gain, with durable goods rising 4.4%.  GPDI subtracted 1.00% from GDP. Net Exports reduced GDP by 0.65%. GCE increased GDP by 0.85% (Table 2 of the report - Page 8.)

The Same quarter GDP number disappointed at 2.3%. The trajectory, pre-revisions, was eleven consecutive quarters of growth. We were over 3%. The same quarter GDP data was revised lower for 2018Q3, 2018Q4 and 2019Q1.  The same quarter GDP was revised higher for 2016Q3 and Q4, 2017 Q1 through Q4, 2018Q1 and  Q2

Where was the growth for same quarter GDP? PCE rose by 2.6% . GPDI grew by 4.1% Net Exports fell 1.5% while net imports rose 2.6%.  GCE grew by 2.4%

Earning More - More Disposable Income - More Savings. We know from the June Jobs Report that Hours worked rose, the average hourly wage rose, and the number of workers rose annually. Win. Win. Win. Real disposable income rose by 3.2% (table 6,) while real disposable income rose 2.5% quarter to quarter and 4.9% in current dollar measure (both Table 1.)  Our personal savings rate, as a percentage of disposable income was 8.5% Q1 and 8.1% Q2. The savings rate was 6.8% (2016) and 7.0% (2017) and then 7.7% (2018.) Is "all the talk about a pending recession causing people to spend less, save more, an feed the slower growth thinking?

The revisions to the data meant that the "final" 2017 annual growth rate dropped from 2.4% to 2.2%. The annual rates of growth was unchanged for 2014, 2015, 2016, and 2018.  Still no 3.0% annual growth rate for former President Obama.

The data was decidedly mixed.The 2.1% growth could bolster Q3 growth by jumping less this quarter than it could have jumped this quarter. Always watch the revisions.

It's the Economy.