Thursday, October 27, 2011

USA GDP Estimated +2.5% for Q3 (GDP Charts) *Real GDP at $15+ trillion all-time high*


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Bureau of Economic Analysis: USA Quarterly GDP Estimate

USA GDP Q3 2011 Advance Estimate The Bureau of Economic Analysis released the Advance Estimate of Q3 2011 GDP which was +2.5% QoQ, for a total GDP of $15.199 trillion (annualized). This is a significant increase from the Q2 2011 GDP of +1.3% (final). The Q3 2011 GDP (advance estimate) of +2.5% is the highest since Q3 2010 (+2.5%). The GDP has increased for 9 consecutive quarters, since Q3 2009, although growth rates have ranged from a near-abysmal +0.4% in Q1 2011 to an encouraging +3.9% in Q1 2010. This is an advance estimate, with a second estimate to be reported in November and a third (final) estimate to be reported in December. This advance estimate can be revised downwards.

Where is the USA Economy Going? The Big Question: where is the USA economy headed? Three scenarios are usually discussed: 1) a double dip recession whereby the GDP will turn negative yet again with a higher unemployment rate, 2) the economy will continue "bottom bouncing" with very slow growth and a continuing high unemployment rate or 3) the bottom is in and GDP growth will accelerate and the unemployment rate will begin to decrease. Scenario 2) with slow economic growth and a continuing high unemployment rate appears to be the consensus for 2011 and 2012, with an annual GDP growth projected of approximately +1.5% or less. The risk of a double-dip recession has increased significantly in 2011 with the Q1 and Q2 GDPs reported at +0.4% and +1.3%, respectively, due to a spike in oil prices dragging on USA and Global economic growth plus the Japanese earthquake, tsunami, and nuclear crisis disrupting the global economy in March 2011. The effects of both events have subsided. Additional economic, fiscal, and political uncertainties then increased, including the EU Sovereign Debt Crisis and USA political deadlock. Another quarter, Q4 2011, of +2.5% GDP growth is necessary to mitigate the ongoing USA economic damage and does little to nothing regarding the USA fiscal crisis and debt issues.

USA Real GDP % by Quarter (Chart) The chart below is the annualized percentage change of the Real GDP (seasonally adjusted at annual rate) from the preceding quarter (QoQ), a common GDP measure. A negative drop into the Great Recession began Q3 2008, followed by a plunge in Q4 2008. The Great Recession continued for 4 quarters until Q2 2009. Positive GDP growth resumed in Q3 2009, the rebound peaking in Q1 2010 at +3.9%, and has continued for 9 consecutive quarters. The chart covers the USA Quarterly GDP as reported by the Bureau of Economic Analysis from Q2 2005 through the latest quarter reported.


USA Real GDP $ by Quarter (Chart) The chart below is the Real GDP (seasonally adjusted at annual rate) in total current dollars (annualized). The USA GDP pre-recession peak was Q2 2008 and the Great Recession low was Q2 2009. USA GDP has now increased 9 consecutive quarters. The Q3 2011 GDP (annualized) exceeds both Q2 2008 ($14.416 trillion) pre-recession peak and the prior Q2 2011 peak ($15.013 trillion) to reach an all-time high of $15.199 trillion. The chart covers the USA Quarterly GDP (annualized) as reported by the Bureau of Economic Analysis from Q2 2005 through the latest quarter reported.


Commentary The Q3 2011 USA Quarterly GDP (advance estimate) of +2.5% is a surprise to the upside, but is subject to two more revisions. We originally estimated the USA Quarterly GDP QoQ for Q3 2011 as probably +1.5% or less. We are revising this upwards to probably +1.75% or less. The current Q4 2011, the QE 12-31-11, appears from various, initial economic indicators to be stronger than Q3 2011. We now initially estimate the USA Quarterly GDP QoQ for Q4 2011 as +1.75% or less. The risk of a recession, a negative GDP, appears to have decreased.


The Bureau of Economic Analysis
Gross Domestic Product: Third Quarter 2011 (Advance Estimate)
October 27, 2011

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.5 percent in the third quarter of 2011 (that is, from the second quarter to the third quarter) according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.3 percent.

The Bureau emphasized that the third-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The "second" estimate for the third quarter, based on more complete data, will be released on November 22, 2011.

The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, and federal government spending that were partly offset by negative contributions from private inventory investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The acceleration in real GDP in the third quarter primarily reflected accelerations in PCE and in nonresidential fixed investment and a smaller decrease in state and local government spending that were partly offset by a larger decrease in private inventory investment.

Final sales of computers added 0.21 percentage point to the third-quarter change in real GDP after adding 0.07 percentage point to the second-quarter change. Motor vehicle output added 0.07 percentage point to the third-quarter change in real GDP after subtracting 0.10 percentage point from the second-quarter change.


Bureau of Economic Analysis Revised USA GDPs

On July 29, 2011, the BEA announced revisions of the USA quarterly and annual GDPs from Q1 2007 through Q1 2011. The original, final data and the revised data are shown on the chart below. The BEA provides an original 3 estimates (advance, second, third) and periodically revises the third, final estimate. These data and the revisions are the American economic story, subject to change.

Revisions: USA Real GDP % by Quarter (Chart) The chart below is the annualized percentage change of the Real GDP (seasonally adjusted at annual rate) from the preceding quarter (QoQ), from Q1 2008 through Q2 2011. The original Bureau of Economic Analysis GDP data is in blue. The revised Bureau of Economic Analysis GDP data is in red.  An initial negative drop occurred in Q1 2008, but was followed by a positive bounce in Q2 2008. A negative drop into the Great Recession began Q3 2008 at the time of the USA Financial Crisis, followed by a steep decline, and bottom, in Q4 2008. The deepness of the Great Recession continued in Q1 2009. The Great Recession continued for 4 quarters until Q2 2009. Positive GDP growth resumed in Q3 2009, the rebound peaking in late 2009 and early 2010. The Q1 2010 GDP of +3.9% is now the recent recovery peak.



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