Tuesday, July 31, 2012

USA Second Quarter GDP a Lower 1.5%

Bureau of Economic Analysis: Gross Domestic Product

The Bureau of Economic Analysis released the first (advance) estimate of Q2 2012 GDP which was +1.5% quarter over quarter, a decrease from the prior Q1 2012 estimate of +2.0%, and a drop from the previous Q4 2011 of +4.1%. The total GDP reached an all-time high $15.60 trillion annualized. The GDP has increased quarter over quarter for 12 consecutive quarters, since Q3 2009. Growth rates have ranged from a near-recessionary +0.1% in Q1 2011 to a robust +4.1% in Q4 2011.

The Big Question: Where is the USA economy headed? A recession in 2012 does not appear probable (yet), but the USA economy is growing very slowly. 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 and is on the horizon.

Scenario (2) with slow to very slow economic growth and a continuing relatively high unemployment rate has been occurring and is the most likely scenario for 2012, with an annual GDP growth projected of approximately +2.0%. The average of the most recent 4 quarters reported by the Bureau of Economic Analysis is +2.23% (+1.3%, +4.1%, +2.0%, +1.5%).

The latest data reflects the regular annual revision of the national income and product accounts, beginning with the estimates for the first quarter of 2009. This revision incorporates source data that are more complete, more detailed, and otherwise more reliable than those previously available. A later post will review these revisions compared to the prior GDP data reported.

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 debt has reached and passed the threshold of a national funded debt that exceeds GDP as the federal budget deficits continue uncontrolled. The funded sovereign debt to GDP ratio has now exceeded 100%.

In the minds of many Americans, the 100% benchmark is usually surpassed by socialist and totalitarian countries as these misguided, financial inept nations implode into chaos and poverty. An updated review of this USA milestone and the upcoming American Day of Reckoning, the result of the fiscal and monetary excesses in our Spendthrift Nation, will be posted soon.

USA Sovereign Debt Exceeds GDP: Spendthrift Nation

USA Sovereign Debt Now Exceeds GDP: Greetings From Big Brother


Seeking Alpha