8.8 C
New York
Thursday, March 28, 2024

Not Everyone Is Buying 3.7% U.S. GDP in 2Q; “Only the Chinese Numbers Are More Suspect”

Courtesy of Pam Martens.

Janet Yellen, Chair of the Federal Reserve, Taking the Oath at Her Senate Confirmation Hearing

Janet Yellen, Chair of the Federal Reserve, Taking the Oath at Her Senate Confirmation Hearing

When the revision to second quarter Gross Domestic Product was released by the Commerce Department on August 27, boosting GDP to 3.7 percent, it had a lot of people scratching their heads. Consumer Metrics Institute came right out with it, writing: “Once again we wonder how much we should trust numbers that bounce all over the place from revision to revision. One might expect better from a huge (and expensive) bureaucracy operating in the 21st century. Among major economies, only the Chinese numbers are more suspect.” Ouch.

Jeffrey Sparshott and Jon Hilsenrath, economic writers at the Wall Street Journal, were more subtle in their assessment, suggesting that “How fast the economy grew depends on how you measure it. An alternative measure, gross domestic income, advanced at a much slower 0.6% pace last quarter. Both GDP and GDI measure overall economic activity but tap different source data: GDP uses expenditures and GDI uses incomes. While they should move in the same direction, there are often short-term discrepancies.”

The difference between 0.6 percent growth and 3.7 percent growth might be viewed by some as more than a “discrepancy.” Not to put too fine a point on it, but 3.7 is more than 6 times the rate of growth as measured by Gross Domestic Income for the second quarter.

There is also the concern that this exuberant 3.7 percent growth in GDP came when both earnings and revenues on the Standard and Poor’s 500 (the largest companies in the U.S.) contracted. On August 25, Bloomberg Business wrote that “Profits reported by S&P 500 companies in the second quarter fell 2 percent from a year ago and are projected to slip 5.5 percent in the current period.” (FactSet says the decline was 0.7 percent in the second quarter.) Of equal alarm, revenue growth fell by 3.4 percent, according to S&P Capital IQ.

If the largest corporations in the U.S. are experiencing a slowdown why isn’t the overall U.S. economy?


Continue Here

 

1 COMMENT

Subscribe
Notify of
1 Comment
Inline Feedbacks
View all comments

Stay Connected

157,452FansLike
396,312FollowersFollow
2,280SubscribersSubscribe

Latest Articles

1
0
Would love your thoughts, please comment.x
()
x