Friday, May 25, 2012

USA First Quarter GDP a Disappointing +2.2%

Bureau of Economic Analysis: Gross Domestic Product

The Bureau of Economic Analysis released the first (advance) estimate of Q1 2012 GDP which was +2.2% quarter over quarter, a drop from the prior Q4 2011 of +3.0%. The total GDP was an all-time high $15.46 trillion annualized. The GDP has increased quarter over quarter for 11 consecutive quarters, since Q3 2009. Growth rates have ranged from a near-abysmal +0.4% in Q1 2011 to an encouraging +3.9% in Q1 2010.

The Big Question: Where is the USA economy headed? A recession in 2012 does not appear probable, but continues as a low risk. 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 slow to very slow growth and a continuing relatively high unemployment rate, or 3) the bottom is in and GDP growth will accelerate and full employment is on the horizon.

Scenario 2) with slow to very slow economic growth and a continuing relatively high unemployment rate appears to be the most likely scenario for 2012, with an annual GDP growth projected of approximately +2.0% or a little more. The average of the most recent 4 quarters reported by the Bureau of Economic Analysis is +2.08% (+1.3%, +1.8%, +3.0%, +2.2%).

There is a more important chapter developing in the Story of America. The annualized GDP is $15+ trillion and the funded national debt has also exceeded $15 trillion. Yes, the USA is at the threshold of a national debt that exceeds GDP as the federal budget deficits continue uncontrolled. The sovereign debt to GDP  ratio is reaching, then will exceed, 100%. Depending on the data, we are either at 100% or will be there very soon.

In the minds of many Americans, the 100% benchmark is usually surpassed by wild-eyed socialist countries and absurd dictators as these misguided nations implode into chaos and poverty. In the coming weeks, I'll explore the upcoming American Day or Reckoning, the result of the fiscal and monetary excesses in the American Dream Gone Wild.


Seeking Alpha