Last 10 Monthly Index Values
| Date: | 07/2012 | 08/2012 | 09/2012 | 10/2012 | 11/2012 | 12/2012 | 01/2013 | 02/2013 | 03/2013 | 04/2013 |
| Value: | 104.10 | 96.19 | 97.75 | 94.29 | 95.26 | 94.93 | 96.15 | 94.64 | 97.89 | 98.04 |
Consumer Metrics InstituteTMHistoric Charts and Commentary |
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| Date: | 07/2012 | 08/2012 | 09/2012 | 10/2012 | 11/2012 | 12/2012 | 01/2013 | 02/2013 | 03/2013 | 04/2013 |
| Value: | 104.10 | 96.19 | 97.75 | 94.29 | 95.26 | 94.93 | 96.15 | 94.64 | 97.89 | 98.04 |
| Consumer Metrics Institute's Contraction Watch(1): | ||
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| Notes: (1) The comparison of the 91-Day Growth Indexes during the 'quarter' immediately following the commencement of a contraction. The contraction events of 2008 and 2010 are shown against the same scale of annualized contraction. |
| Contraction Severity Gauge(2): | ||
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| Notes: (2) The number of percentage-days of contraction experienced during the 'Great Recession of 2007-2009' compared to the similar measure for the 2010 contraction. |
| Daily Growth Index Past 60 Days(1): | ||
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| Notes: (1) The daily values for the Consumer Metrics Institute's 91-day 'Trailing Quarter' Growth Index over the past 60 days. Please see our Frequently Asked Questions page for a more complete description of our Growth Index. |
| Growth Index -vs- Full GDP, Past 4 Years(2): | ||
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| Notes: (2) The Consumer Metrics Institute's 91-day 'Trailing Quarter' Growth Index -vs- BEA's Quarterly Full GDP Growth Rates over past 4 years. The quarterly GDP growth rates are shown as 3-month plateaus in the graph. The Consumer Metrics Institute's Growth Index is plotted as a monthly average. |
| BEA "Real" GDP -vs- BLS Deflated "Nominal" GDP, Past 4 Years(3,4): | ||
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| Notes: (3) Line items in the BEA's nominal GDP are deflated by either the Bureau of Labor Statistic's (BLS) CPI-U index or the BLS PPI index, according to whichever is most appropriate. (4) Note that when deflating the line items in the GDP tables from the BEA it is important to treat the "nominal" import and export data as the effective net "real" data -- since there are no offsetting domestic transactions carrying the correspondingly inflated or deflated prices (i.e., the one-sided net impact of inflating imported commodities is "real" to the economy). The net consequences of inflating import prices may become material in times of substantial and sustained trade imbalances. |
| BEA "Real" GDP -vs- BLS Deflated Per-Capita GDP, Past 4 Years(5): | ||
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| Notes: (5) Line items in the BEA's nominal GDP are deflated by either the Bureau of Labor Statistic's (BLS) CPI-U index or the BLS PPI index, and reported on a per-capita basis by using Census Bureau projected mid-quarter population data. |
| BEA "Real" GDP -vs- BLS Deflated Per-Capita Disposable Income, Past 4 Years(6): | ||
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| Notes: (6) Line items in the BEA's Disposable Personal Income report are deflated by the Bureau of Labor Statistic's (BLS) CPI-U index and reported on a per-capita basis by using Census Bureau projected mid-quarter population data. |
| BEA "Real" GDP -vs- BLS Deflated Per-Capita Proprietor Income, Past 4 Years(7): | ||
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| Notes: (7) The Proprietors' income (with inventory valuation and capital consumption adjustments) line from the BEA's Disposable Personal Income report are deflated by the Bureau of Labor Statistic's (BLS) CPI-U index and reported on a per-capita basis by using Census Bureau projected mid-quarter population data. |
 | April 26, 2013 - BEA Estimates 1st Quarter 2013 GDP Growing at 2.5% Annual Rate: In their first estimate of the US GDP for the first quarter of 2013, the Bureau of Economic Analysis (BEA) reported that the economy was growing at a 2.50% annualized rate, some 2.12% better than the 0.38% growth rate for the prior quarter. Although the headline number itself indicates moderate mid-cycle growth, the details within the BEA's report cast at best a mixed message for the overall health of the economy. For example: although the overall contribution from consumer spending was up, it came mainly from spending on services (boosting the headline number by 1.46%, and principally spent on non-discretionary rents and utilities), with consumer spending for goods contributing to the headline number at a more modest 0.78% (down about -0.24% from the prior quarter). And although fixed investments were still contributing a positive 0.53% to the headline number, that was down over a full percent from the prior quarter. In fact, inventories swinging back to growth (after contracting during the prior quarter) arguably provided all of the quarter-to-quarter improvement in the headline growth rate. For this set of revisions the BEA assumed annualized net aggregate inflation of 1.20%. In contrast, during the first quarter the seasonally adjusted CPI-U published by the Bureau of Labor Statistics (BLS) recorded a 2.10% annualized inflation rate. As a reminder: an understatement of assumed inflation increases the reported headline number -- and in this case the BEA's relatively low "deflater" (nearly a full percent below the CPI-U) boosted the published headline rate. If the CPI-U had been used to convert the "nominal" GDP numbers into "real" numbers, the reported headline growth rate would have been a much more modest 1.63%. Finally, one of the bright spots in the prior quarter's data (the previously reported substantial improvements in real per capita disposable income) completely reversed in this report -- confirming that the fourth quarter's upward surge in real per capita disposable income was merely an artifact of payroll "gaming" in anticipation of increasing tax rates. In fact, real per capita disposable income contracted during the quarter at an astonishing -5.88% annualized rate -- crashing back to levels that are below where they were two years ago. And, as expected, consumers offset the "new" FICA rate increase of 2% by reducing their savings rate by -2.1%. Although this arguably propped up consumer spending during the quarter, it is important to note that that spending support came in spite of a sharp contraction in sustainable household incomes. Among the notable items in the report: -- The contribution of consumer expenditures for goods to the headline number weakened to 0.78% (down from 1.02% in the fourth quarter of 2012). -- The contribution made by consumer services soared to 1.46% (up 1.19% from the previous quarter). As noted above this increase came from higher spending for non-discretionary rents and utilities. -- The growth rate contribution from private fixed investments dropped sharply to 0.53% (from 1.69% in the previous quarter). -- Inventories grew, raising the headline number by 1.03% (reversing their drag on the previous quarter's headline of -1.52%). -- The previous quarter's sharp contraction in government spending moderated somewhat, and it is now removing -0.80% from the headline number (an improvement of 0.61% from the -1.41% drag reported for the prior quarter -- and almost all of that "improvement" came from Federal defense spending). -- Improving exports added 0.40% to the headline number (perfectly reversing the -0.40% drag reported for fourth quarter of 2012). -- But that good news was more than completely offset by a significant drop in the contribution from imports -- which removed -0.90% from the headline number after adding +0.73% in the prior quarter. Since this drag on the headline number can come from increasing domestic demand for foreign goods it is often spun as a sign of a strengthening economy, although it can often be merely a sign of rising commodity prices. -- The annualized growth rate of "real final sales of domestic product" dropped to 1.47% (from 1.90% in the prior quarter). This is the BEA's "bottom line" measurement of the economy, and the -0.43% erosion in that growth rate is a consequence of the surging inventories. -- And real per-capita disposable income took a monumental hit: it dropped by an annualized $498 from quarter to quarter, while personal savings plunged to 2.6% (dropping 2.1% from the 4.7% recorded in the prior quarter). Real per-capita disposable income is now down $123 annually from 1Q-2011 -- a full two years ago. The Numbers As a quick reminder, the classic definition of the GDP can be summarized with the following equation: or, as it is commonly expressed in algebraic shorthand: In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows: GDP Components Table
Quarterly Changes in % Contributions to GDP
Summary On the surface a 2.50% annualized growth rate at nearly full four years into a recovery is good news -- and a growth rate that many other global economies would currently be pleased to be reporting. And looking at the details provides us with some reasons for optimism: -- Consumer spending was sustained in spite of tax increases, -- Fixed investments continued to grow, -- Exports swung back to growth after a quarter of contraction. But two major components within the data continue to suggest reasons for caution: -- Inventories are growing once again, with the quarter-to-quarter swing in inventories (+2.55%) contributing more than the entire improvement in the headline number, -- Real per capita disposable incomes took a major hit, and consumers had to dip into savings to sustain spending levels in the face of increasing taxes. Clearly the last two items are cause for concern for the long term health of the economy. We have argued before that an ongoing contraction in real per capita disposable income has been the most critical feature of the BEA data releases during the past several years -- and we see no reason to change that argument now. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | March 28, 2013 - BEA Revises 4th Quarter 2012 GDP Upward to a 0.38% Annual Growth Rate: In their third estimate of the US GDP for the fourth quarter of 2012 the Bureau of Economic Analysis (BEA) reported that the economy was growing at a 0.38% annualized rate, roughly 2.7% worse than the 3.09% growth rate that they recorded for the prior quarter. The new number is 0.24% higher than the previously published estimate for the fourth quarter, but as such it merely represents an improved understanding of historic 4th quarter 2012 economic data and not improved month-to-month economic activity. Although the headline number shows both an upward revision and positive growth, the 0.38% number remains not statistically distinguishable from a stalled economy. The positive revisions came primarily from fixed investments, with "less negative" exports providing an additional boost. Consumer activities were marginally weaker than previously reported, and governmental spending continued to shrink. For this set of revisions the BEA assumed annualized net aggregate inflation of 0.97%. In contrast, during the third quarter the seasonally adjusted CPI-U published by the Bureau of Labor Statistics (BLS) recorded a dis-inflationary -0.75% annualized "inflation" rate. As a reminder: an overstatement of assumed inflation decreases the reported headline number -- and in this case the BEA's relatively high "deflater" (more than 1% above the CPI-U) hurt the published headline rate. If the CPI-U had been used to convert the "nominal" GDP numbers into "real" numbers, the reported headline growth rate would have been a 1.51% growth rate. If data for online prices from the Billion Prices Project had been used to deflate the BEA's nominal data, the growth rate would have been 1.35% annualized. And the previously reported improvements in real per capita disposable income were essentially sustained, with the annualized growth rate for per capita disposable income now reported to be a still healthy +5.36%. It should be noted that more than half of this increase in disposable income was offset by increased personal savings (up about $131 billion per year, or roughly 1% of GDP) as households remained cautious in their spending habits in anticipation of the fully restored FICA deductions that will take back most of the fourth quarter's net disposable household cash gain during 1Q-2013. Among the notable items in the report: -- The contribution of consumer expenditures for goods to the headline number was revised downward slightly to 1.02% (from 1.03% in the previous estimate). -- The contribution made by consumer services dropped by over a third to 0.27% (down from 0.44% previously reported). -- The growth rate contribution from private fixed investments was up sharply to 1.69% (from 1.36% in the previous report), providing essentially all of the upward movement in the headline number. -- Inventory draw-downs moderated slightly, removing -1.52% from the headline number (-1.55% previously). Since the inventory data in the BEA's reports are often impacted significantly by not-fully-compensated commodity price changes, it is difficult to tease out of these numbers the true source of any changes (e.g., uncorrected oil pricing anomalies or genuine changes to supply chain stocks and/or manufacturing schedules). -- The previously reported sharp contraction in government spending became even slightly more negative, removing -1.41% from the headline number. -- Declining exports removed -0.40% from the headline number (an improvement, however, of +0.15% from the -0.55% negative contribution previously reported). The net drag from exports continues to be consistent with a generally weakening global economy, and is a trend we might expect to have been continuing in the current quarter. -- And reduced imports actually added +0.73% to the headline growth rate (down slightly from the 0.79% in the previous report). Again, this shows as a positive component in the GDP equation even though weakening demand for imports is often actually a sign of a slowing economy. -- The annualized growth rate of "real final sales of domestic product" was revised upward to 1.90%, still some -0.46% below the prior quarter. This is the BEA's "bottom line" measurement of the economy. -- And real per-capita disposable income was revised downward a net $35 to $33,138 per year (although that revised number is still about $430 per year above the numbers published for 3Q-2012. From an economic standpoint however, a significant share of that was absorbed when the personal savings rate soared from 3.6% to 4.7%, pulling $365 of that annual improvement into savings or deleveraging activities instead of consumptive spending. The Numbers, As Revised As a quick reminder, the classic definition of the GDP can be summarized with the following equation: or, as it is commonly expressed in algebraic shorthand: In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows: GDP Components Table
Quarterly Changes in % Contributions to GDP
Summary Despite the modest growth reported in this release, there remain reasons to be cautious about the economy: -- Even as revised this data represents an economy that is growing at a rate some 2.7% less than during the prior quarter (the greatest downward quarter-to-quarter change since the fourth quarter of 2008). -- As we have mentioned before, 4Q-2012 may be the quarter that in retrospect will be viewed as the last gasp of the "Great Recovery" -- before there were significant economic headwinds created by reductions in consumer take-home pay, rising gas prices and accelerating contractions in global trade. If all other components of the economy stay the same, those factors alone could remove well over 2% from real-time economic "growth" by the end of the first quarter of 2013: the normalization of FICA deductions alone could reduce consumer spending enough to pull the headline number down by 1%, the $.50 per gallon increase in gas prices could similarly remove another 0.5% from the headline number, and weakening exports could easily reduce the headline number by another 1%. -- And lastly, this third estimate had only one significant revision -- the upward restatement of fixed investments, which numerically provides more than the entire boost to the headline number. And all of that revision was in non-residential construction -- i.e., commercial real estate, which has grown back to its highest "real" level of activity since the second quarter of 2009. Judging from that number alone someone might conclude that there is a shortage of vacant office and retail space in the US. On the other hand, we might just be seeing the first tangible signs of a ZIRP (zero interest rate policy) induced "mis-allocation of capital." Presumably there are people who are really good at building commercial structures (whether they are really needed or not), and apparently they have access to essentially free money. We have recently seen how that same scenario has played out in China, where empty shopping centers and empty cities have become too obvious to ignore. We have wondered before if we are experiencing the Japanization of the US economy. Maybe commercial real estate is instead heading towards China. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | February 28, 2013 - BEA Revises 4th Quarter 2012 GDP Upward to a 0.14% Annual Growth Rate: In their second estimate of the US GDP for the fourth quarter of 2012 the Bureau of Economic Analysis (BEA) reported that the economy was growing at a minuscule 0.14% annualized rate, roughly 3% worse than the 3.09% growth rate that they recorded for the prior quarter. The new number is 0.28% higher than the previously published estimate for the fourth quarter, but as such it merely represents an improved understanding of historic 4th quarter 2012 economic data and not improved month-to-month economic activity. Neither this 0.14% positive growth rate nor the previously published -0.14% contraction rate show an economy that is statistically in anything other than a dead stall. The positive revisions came from fixed investments and trade (both increased exports and reduced imports). Consumer activities were marginally weaker than previously reported, and inventories continued to shrink. For this set of revisions the BEA assumed annualized net aggregate inflation of 0.88%. In contrast, during the third quarter the seasonally adjusted CPI-U published by the Bureau of Labor Statistics (BLS) recorded a dis-inflationary -0.75% annualized "inflation" rate. As a reminder: an overstatement of assumed inflation decreases the reported headline number -- and in this case the BEA's relatively high "deflater" (more than 1% above the CPI-U) hurt the published headline rate. If the CPI-U had been used to convert the "nominal" GDP numbers into "real" numbers, the reported headline growth rate would have been a 1.77% growth rate. If data for online prices from the Billion Prices Project had been used to deflate the BEA's nominal data, the growth rate would have been 1.02% annualized. And the previously reported improvements in real per capita disposable income were essentially sustained, with the annualized growth rate for per capita disposable income now reported to be a still healthy +5.65%. It should be noted that more than half of this increase in disposable income was offset by increased personal savings (up about $132 billion per year, or roughly 1% of GDP) as households remained cautious in their spending habits in anticipation of the fully restored FICA deductions that will take back most of the fourth quarter's net disposable household cash gain during 1Q-2013. Among the notable items in the report: -- The contribution of consumer expenditures for goods to the headline number was revised downward to 1.03% (from 1.08% in the previous estimate). -- The contribution made by consumer services remained flat at 0.44%. -- The growth rate contribution from private fixed investments was up to 1.36% (from 1.19% in the previous report). -- Inventory draw-downs accelerated, removing -1.55% from the headline number. Since the inventory data in the BEA's reports are often impacted significantly by not-fully-compensated commodity price changes, it is difficult to tease out of these numbers the true source of any changes (e.g., uncorrected oil pricing anomalies or genuine changes to supply chain stocks and/or manufacturing schedules). -- The previously reported sharp decrease in government spending became slightly more negative, removing -1.38% from the headline number. -- Declining exports removed -0.55% from the headline number (an improvement, however, of +0.26% from the -0.81% negative contribution previously reported). The net drag from exports is consistent with a generally weakening global economy. -- And reduced imports actually added +0.79% to the headline growth rate (up from the 0.56% in the previous report). Again, this shows as a positive component in the GDP equation even though weakening demand for imports is often actually a sign of a slowing economy. -- The annualized growth rate of "real final sales of domestic product" was revised upward to 1.69%, still some -0.67% below the prior quarter. This is the BEA's "bottom line" measurement of the economy. -- And real per-capita disposable income was revised downward slightly to $33,143 per year, although that revised number is still about $450 per year above the numbers published for 3Q-2012. From an economic standpoint however, a significant share of that was absorbed when the personal savings rate soared from 3.6% to 4.7%, pulling $365 of that annual improvement into savings or deleveraging activities instead of consumptive spending. The Numbers, As Revised As a quick reminder, the classic definition of the GDP can be summarized with the following equation: or, as it is commonly expressed in algebraic shorthand: In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows: GDP Components Table
Quarterly Changes in % Contributions to GDP
Summary Despite the new-found minuscule "growth" reported in this release, there are ample reasons to remain cautious about the economy: -- Even as revised this data represents an economy that is statistically in a dead stall, "growing" at a rate some 3% less than during the prior quarter (the greatest downward quarter-to-quarter change since the fourth quarter of 2008). -- This data is still reporting 4Q-2012, a quarter that in retrospect may be viewed as the last gasp of the "Great Recovery" -- before there were significant economic headwinds created by reductions in consumer take-home pay, rising gas prices, sequestered federal spending and accelerating contractions in global trade. If all other components of the economy stay the same, those factors alone could remove something like 3% from real-time economic "growth" by the end of the first quarter of 2013: the normalization of FICA deductions alone could reduce consumer spending enough to pull the headline number down by 1%, the $.50 per gallon increase in gas prices could similarly remove another 0.5% from the headline number, weakening exports could easily reduce the headline number by another 1% and the federal budget sequestrations -- if fully implemented and sustained -- should eventually pull (at maximum, despite doomsday rhetoric) an additional 0.5% from the headline number. -- However, with respect to the "sequestrations": political will and doomsday rhetoric notwithstanding, even if they are implemented by Congressional mandate (or inaction) there may be no reason to expect actual short term government spending to change. The budgetary shenanigans during the third quarter of 2012 (when a defense spending spree created a phantom boost to pre-election economic data by bringing some spending forward by a quarter -- and incidentally across a fiscal year boundary) probably taught the US Federal bureaucracy that as a practical matter they can spend at will and with utter impunity from the budgetary intentions of the fiscally conservative majority in the US House of Representatives. In the day-to-day reality of this Administration there simply may be no legal or political consequences to overspending Congressionally approved budgets in pursuit of the perceived greater good. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | January 30, 2013 - BEA Reports 4th Quarter 2012 GDP Contracting at -0.14% Annual Rate: In their first (or "advance") estimate of the US GDP for the fourth quarter of 2012 the Bureau of Economic Analysis (BEA) found that the economy was shrinking at a -0.14% annualized rate, over 3% worse than the 3.09% growth rate that they recorded for the prior quarter. The contraction was driven primarily by dramatic reversals to the prior one-quarter spikes in government spending and inventory growth, which sharply improved the final headline number for the 3rd quarter. The reversals of those two line items reduced the headline number by over 4%. This report also showed substantial weakening in exports, although that was also offset somewhat by a softening of imports. Despite the gloom in the headline number, there were actually some positive signs in the details of the report. The consumer spending portions of the report were actually slightly stronger than reported for the prior quarter, with the modest upturn in consumer activity adding over +0.40% to the headline number. And commercial fixed investment improved enough to provide a 1% boost to the overall economic growth rate. For this set of revisions the BEA assumed annualized net aggregate inflation of 0.60%. In contrast, during the third quarter the seasonally adjusted CPI-U published by the Bureau of Labor Statistics (BLS) recorded a dis-inflationary -0.75% annualized "inflation" rate. As a reminder: an overstatement of assumed inflation decreases the reported headline number -- and in this case the BEA's relatively high "deflater" (more than 1% above the CPI-U) hurt the published headline rate. If the CPI-U had been used to convert the "nominal" GDP numbers into "real" numbers, the reported headline growth rate would have been a modest (but positive) 1.21% growth rate. And the previous ongoing contraction of real per capita disposable income was reported to have come to an end, with the annualized growth rate for per capita disposable income now reported to be a very healthy +6.03%. This decidedly good news was somewhat offset by a substantial surge in savings (up about $140 billion per year, or roughly 1% of GDP) as households remained cautious in their spending habits. It should also be remembered that the fully restored FICA deductions will take back some of that disposable income gain during 1Q-2013 -- which may also explain the cautious expenditures. Among the notable items in the report: -- The contribution of consumer expenditures for goods to the headline number was revised upward to 1.08% (from 0.85% in the previous quarter). -- The contribution made by consumer services increased to 0.44% -- up from the 0.26% in the previous period. -- The growth rate contribution from private fixed investments was up sharply to 1.19% (from 0.12% in the prior quarter). -- Inventory draw-downs removed -1.27% from the headline number, down a full 2% from the positive 0.73% contribution during the prior quarter. Since the inventory data in the BEA's reports are often impacted significantly by not-fully-compensated commodity price changes, it is difficult to tease out of these numbers the true source of the sharp reversal (e.g., uncorrected oil pricing anomalies or genuine changes to supply chain stocks and/or manufacturing schedules). -- A sharp decrease in government spending removed -1.33% from the headline number. This change more than fully reversed the prior quarter's surge of spending in the same sector. Nearly all of this swing was in defense spending, where all of the surge in 3Q-2012 was fully reversed in 4Q-2012. The third quarter boost to the headline number was simply brought forward from the fourth quarter. State and local government also slipped back into contraction, removing an aggregate -0.08% from the headline annualized growth rate. -- Declining exports removed -0.81% from the headline number (sharply down from the +0.27% positive contribution during the prior quarter). Unlike the prior quarter this export picture finally seems to be reflecting the generally weakening global economy. -- And reduced imports actually added +0.56% to the headline growth rate (up from the 0.11% in the previous quarter). Again, this shows as a positive component in the GDP equation even though weakening demand for imports is often actually a sign of a slowing economy. -- The annualized growth rate of "real final sales of domestic product" was revised downward to 1.13%, some -1.23% below the prior quarter. This is the BEA's "bottom line" measurement of the economy. -- And perhaps the best news in a long time: real per-capita disposable income was up $482 annually during the quarter (to $33,173 per year). From an economic standpoint however, a significant share of that was absorbed when the personal savings rate soared from 3.6% to 4.7%, pulling $365 of that annual improvement into savings or deleveraging activities instead of consumptive spending. The Numbers As a quick reminder, the classic definition of the GDP can be summarized with the following equation: or, as it is commonly expressed in algebraic shorthand: In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows: GDP Components Table
Quarterly Changes in % Contributions to GDP
Summary There are several quarter-to-quarter "take aways" from the report: -- As detailed above, the contraction was driven primarily by dramatic (but not unexpected) reversals to the one-quarter spikes in government spending and inventory growth, which sharply (and conveniently) improved the headline number just prior to the November election. At best both of those one-quarter binges simply brought zero-sum economic activity forward by a quarter, and at worse we will see both of these surges later treated as data anomalies that disappear in future revisions. -- For those of us who follow these numbers closely (and perhaps foolishly try to make some longer-term sense of them), the inexplicable economic surge reported for the third quarter has now at least reversed, and the general weakening pattern previously recorded for 2012 seems to have been confirmed. -- The consumer data was actually a modest bright spot. Per-capita disposable income increased substantially, as did personal consumption expenditures for both goods and services. Similarly commercial fixed investment expenditures improved. But there are several longer term issues with the data: -- We have mentioned before that the BEA is notoriously poor at recording turning points in the economy in "real time." The first quarter of 2008 was a classic example, initially being reported in "real time" as yet another quarter of sustained growth before being revised downward several times over some 40 months to become the first quarter of contraction leading into what we now call the "Great Recession." We fully expect that ultimately the surprising economic upturn seen in the 3Q-2012 data will largely vanish in future revisions. -- And in truth it is hard to look at these new numbers without at least some cynical thoughts about the reported numbers for the prior quarter. We were frankly astonished when the final numbers for the third quarter came in at a 3.09% "full recovery" growth rate, driven largely by unexplained increases in Federal spending, particularly in the Department of Defense (DOD) -- the timing of which was completely controlled by an Administration in serious need of positive pre-election economic headlines. The annualized rates of growth for defense spending rose to over 15% in 3Q-2012, only to magically reverse to a -15% annualized contraction rate in 4Q-2012 -- after the polls had closed. To that last point: arguably the DOD was simply moving materiel acquisitions forward in anticipation/avoidance of "fiscal cliff" sequesters, with the economic impact of the contracting binge a mere side effect of bureaucratic hoarding. We should all hope that the context of any such timing shenanigans were more budgetary than political in nature. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | December 20, 2012 - BEA Raises 3rd Quarter 2012 GDP Growth Estimate Once Again to 3.09%: In their third (and "final") estimate of the US GDP for the third quarter of 2012 the Bureau of Economic Analysis (BEA) found that the economy was growing at a 3.09% annualized rate, an upward revision of +0.42% from the previously published estimate for that quarter and 1.83% better than the second quarter of 2012. The improved headline number came primarily from substantial upward revisions to exports, consumer services and government expenditures, and a decrease in imports. Minor upward revisions in consumer goods and fixed investments was offset by a downward revision to inventories. The annualized growth rate for the BEA's bottom line "real final sales of domestic product" was also revised up significantly to 2.36%. Perhaps most surprisingly, for the first time since the fourth quarter of 2009 real state and local government expenditures are now reported to be growing. In fact, surging governmental expenditures at all levels contributed +0.75% to the headline number -- with nominal defense spending alone growing at an astounding annualized 13.9% rate. For this set of revisions the BEA assumed annualized net aggregate inflation of 2.74%. In contrast, during the third quarter the seasonally adjusted CPI-U published by the Bureau of Labor Statistics (BLS) recorded a substantially higher 4.98% annualized inflation rate. As a reminder: an understatement of assumed inflation improves the reported headline number -- and in this case the BEA's low "deflater" (more than 2% below the CPI-U) significantly boosted the published headline rate. If the CPI-U had been used to convert the "nominal" GDP numbers into "real" numbers, the reported headline growth rate would have been a much weaker 0.93%. And the contraction rate for real per capita disposable income is now reported to have moderated slightly (although it is still reported to be contracting at a -0.24% annualized rate). During the past 6 quarters (18 months) real per capita disposable income has shrunk by $73 per year -- with $20 of that loss occurring during the past quarter. Once again the combination of increasing consumer expenditures coupled with shrinking disposable income raises concerns about the sustainability of the current recovery. Among the notable items in the report: -- The contribution of consumer expenditures for goods to the headline number was revised upward to 0.85% (from 0.83% in the previous report). -- The contribution made by consumer services increased to 0.26% -- up from the 0.16% in the previous report. -- The growth rate contribution from private fixed investments was largely unchanged at 0.12% (up slightly from 0.10% in the prior report). -- The contribution from inventories remained relatively high (+0.73%), providing about a quarter of the headline number. Over time inventory growth should be a nearly zero-sum game, and presumably this quarter's growth from inventory building will be offset in future quarters by reduced production to shrink excessive inventories. -- From a long term perspective, the biggest change in the third quarter's economy came from sharply increasing governmental expenditures. Growth in government spending at all levels is now reported to have added +0.75% to the headline number after subtracting -0.60% as recently as the first quarter of 2012. -- Exports added more than a quarter of a percent to the headline number (+0.27%). The improving export picture seems to imply an improving global economy despite any number of reports to the contrary. -- And reduced imports actually added +0.11% to the headline growth rate (a change in direction from the -0.02% previously reported). -- The annualized growth rate of "real final sales of domestic product" was revised sharply upward to 2.36%, some 0.46% above the prior report and now at the same level as reported for the first quarter of 2012. -- Real per-capita disposable income was down $20 during the quarter (to $32,691 per year). This is down $73 from the $32,764 reported for the 1st quarter of 2011, now some 6 quarters ago. The reported annualized contraction rate of -0.24% benefits from the relatively low deflaters used by the BEA. If per-capita disposable income were "deflated" using the BLS CPI-U (which presumably is what consumers actually experience when spending their incomes) the annualized contraction rate for per capita consumer spending power is more like -3.65%. The Numbers (as Revised) As a quick reminder, the classic definition of the GDP can be summarized with the following equation: or, as it is commonly expressed in algebraic shorthand: In the new report the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows: GDP Components Table
Quarterly Changes in % Contributions to GDP
Summary Nearly all of the detail in this revised report showed some improvement from the prior estimate. And the roughly 3% headline growth rate is well within the range of what we should be expecting some 13 quarters into an economic "recovery." However, removing the impact of the governmental spending surge, growing inventories and foreign trade removes over three-fifths of the apparent growth. Recapping the issues that merit caution moving forward: -- About a quarter of the headline growth rate came from a surge in governmental spending. -- Inventory growth also contributed about a quarter of the headline growth rate. The BEA's inventory valuations are notoriously dependent on the deflators used, and the wild fluctuation of these numbers from earlier reports raises at least some concerns about their credibility. But even assuming that the reported numbers are correct, substantial growth in current inventories does not bode well for factory production schedules in future quarters. -- The continued contraction of per-capita disposable income means that households are under sustained pressure. Any growth in consumer spending is not coming from fatter paychecks -- it is coming instead from other sources, including refinancing, strategic defaults, reduced personal savings (which now reportedly shrank by $25.9 billion during the quarter) and increased student loans. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commentary Date | Commentary Title | ||
|---|---|---|---|
| 2013-04-26 | April 26, 2013 - BEA Estimates 1st Quarter 2013 GDP Growing at 2.5% Annual Rate | ||
| 2013-03-28 | March 28, 2013 - BEA Revises 4th Quarter 2012 GDP Upward to a 0.38% Annual Growth Rate | ||
| 2013-02-28 | February 28, 2013 - BEA Revises 4th Quarter 2012 GDP Upward to a 0.14% Annual Growth Rate | ||
| 2013-01-30 | January 30, 2013 - BEA Reports 4th Quarter 2012 GDP Contracting at -0.14% Annual Rate | ||
| 2013-01-03 | January 3, 2013 - A Final Review of 2012 Holiday Shopping Season | ||
| 2012-12-20 | December 20, 2012 - BEA Raises 3rd Quarter 2012 GDP Growth Estimate Once Again to 3.09% | ||
| 2012-12-19 | December 19, 2012 - Updated Charts and Holiday Consumer Activities Revisited | ||
| 2012-11-29 | November 29, 2012 - BEA Raises 3rd Quarter 2012 GDP Growth Estimate to 2.67% | ||
| 2012-11-26 | November 26, 2012 - Quick Update on the Impact of Super-Storm Sandy and the Electoral Blues | ||
| 2012-11-05 | November 5, 2012 - Sandy and the Pre-Election Blues | ||
| 2012-10-26 | October 26, 2012 - BEA Reports 3rd Quarter 2012 GDP Growth at 2.02% | ||
| 2012-10-23 | October 23, 2012 - 3rd Quarter GDP Preview and Chart Updates | ||
| 2012-09-27 | September 27, 2012 - BEA Revises Annualized GDP Growth Downward to 1.26% | ||
| 2012-08-29 | August 29, 2012 - BEA Revises Estimate of Annualized GDP Growth to 1.73% | ||
| 2012-08-14 | August 14, 2012 - Our Weighted Composite Index Continues to Plunge | ||
| 2012-07-27 | July 27, 2012 - BEA Estimates GDP Grew at 1.54% Rate During 2nd Quarter | ||
| 2012-07-20 | July 20, 2012 - The Economic Cost of Ugly Politics | ||
| 2012-06-28 | June 28, 2012 - BEA Leaves GDP Growth Rate Unchanged for 1Q-2012 at 1.88% | ||
| 2012-06-19 | June 19, 2012 - Commentary and Chart Updates | ||
| 2012-05-31 | May 31, 2012 - BEA Revises GDP Growth Rate for 1Q-2012 Down to 1.88% | ||
| 2012-05-09 | May 9, 2012 - Chart Updates and Commentary | ||
| 2012-04-27 | April 27, 2012 - BEA Report Shows GDP Growth Slowing During 1Q-2012 to 2.20% | ||
| 2012-03-29 | March 29, 2012 - BEA Leaves 4Q-2011 Annualized GDP Growth Essentially Unchanged at 2.97% | ||
| 2012-02-29 | February 29, 2012 - BEA Revises 4Q-2011 Annualized GDP Growth to 2.98% | ||
| 2012-01-27 | January 27, 2012 - Headline 4Q-2011 GDP Growth of 2.75% Masks Mixed Signals | ||
| 2012-01-19 | January 19, 2012 - Taking a Closer Look at Mixed Signals | ||
| 2011-12-22 | December 22, 2011 - Third Quarter GDP Revised Downward Yet Again | ||
| 2011-11-22 | November 22, 2011 - Third Quarter GDP Revised Downward | ||
| 2011-11-11 | November 11, 2011 - Absolute Demand Index Plummets as Disposable Income Contracts | ||
| 2011-10-27 | October 27, 2011 - GDP Improves Dramatically | ||
| 2011-10-12 | October 12, 2011 - What's Going On? | ||
| 2011-09-29 | September 29, 2011 - BEA Adjusts Second Quarter GDP Growth Rate Upward | ||
| 2011-09-27 | September 27, 2011 - Chart Updates | ||
| 2011-09-16 | September 16, 2011 - Data Update and the Sticky Jobs Situation | ||
| 2011-09-09 | September 9, 2011 - Persistent Questions | ||
| 2011-08-30 | August 30, 2011 - Has the BEA Already Documented the Second Dip? | ||
| 2011-08-26 | August 26, 2011 - BEA Lowers Second Quarter GDP Growth Rate to Below 1% | ||
| 2011-08-24 | August 24, 2011 - Update on Our Indexes | ||
| 2011-08-15 | August 15, 2011 - Daily Growth Index Surge Continues; But Why? | ||
| 2011-08-05 | August 5, 2011 - Special Update: Daily Growth Index Breaks Positive | ||
| 2011-08-04 | August 4, 2011 - The BEA Revisions Revisited | ||
| 2011-08-02 | August 2, 2011 - New Index & Housing Data | ||
| 2011-07-29 | July 29, 2011 - BEA Reports 1Q-2011 and "Great Recession" Far Worse Than We Were Previously Told | ||
| 2011-07-23 | July 23, 2011 - Unexpected Extremes & Mussolini Revisited | ||
| 2011-07-16 | July 16, 2011 - Weighted Composite Index Continues to Strengthen | ||
| 2011-07-09 | July 9, 2011 - Continuing Contraction Moderation; Shakespeare's Stimulating Idea | ||
| 2011-07-02 | July 2, 2011 - Upturn in Daily Growth Index; Stimulating Despite Demographic Dilemmas | ||
| 2011-06-24 | June 24, 2011 - The BEA's Third (and "Final") Estimate of First Quarter 2011 GDP | ||
| 2011-06-21 | June 21, 2011 - Updating the Impact of Strategic Defaults | ||
| 2011-06-15 | June 15, 2011 - Keeping Perspective and Strangulation by Regulation | ||
| 2011-06-05 | June 5, 2011 - Bottom Bouncing and Scholarly Debt End-Games | ||
| 2011-05-26 | May 26, 2011 - The BEA's Second Estimate of First Quarter 2011 GDP | ||
| 2011-05-20 | May 20, 2011 - A Pause in the Ongoing Contraction; Incorporating Debt/GDP End-Games | ||
| 2011-05-14 | May 14, 2011 - Continued Weakness in Consumer Demand; Unthinkable De-Financialization | ||
| 2011-05-05 | May 5, 2011 - Resumed Downturns, Retail Sales and Consumer Confidence | ||
| 2011-04-29 | April 29, 2011 - Bottoming at New Record Lows, Plus Debt/GDP End-Games via Insurrection | ||
| 2011-04-28 | April 28, 2011 - The BEA's Advance Estimate of First Quarter 2011 GDP | ||
| 2011-04-21 | April 21, 2011 - Making Sense of Our Indices, Plus Regime Changing Debt/GDP End-Games | ||
| 2011-04-16 | April 16, 2011 - New Records and "Unthinkable" Sovereign Debt End-Games | ||
| 2011-04-12 | April 12, 2011 - Updated Charts and Mr. Bernanke's Dilemma | ||
| 2011-04-10 | April 10, 2011 - Retail Sales and Credit Expansions | ||
| 2011-04-05 | April 5, 2011 - Automotive Euphoria; Sovereign Debt End-Games | ||
| 2011-03-31 | March 31, 2011 - Continued Weakness; Divergences Revisited | ||
| 2011-03-25 | March 25, 2011 - The BEA's Third Estimate of Fourth Quarter 2010 GDP | ||
| 2011-03-23 | March 23, 2011 - Data Update; Sendai and Japan's Wealth -vs- GDP | ||
| 2011-03-22 | March 22, 2011 - News and the Consumer, Reflections on Chernobyl and the Economy | ||
| 2011-03-19 | March 19, 2011 - News and the Consumer, Bad Instruments and Chernobyl | ||
| 2011-03-13 | March 13, 2011 - Glaring Disconnects and Tsunami Riding Black Swans | ||
| 2011-02-25 | February 25, 2011 - Inside the BEA's New Lower Estimate of 4Q-2010 GDP Growth | ||
| 2011-02-23 | February 23, 2011 - Recent Downturns in Our Indexes & the Fallacy Revisited | ||
| 2011-02-16 | February 16, 2011 - Our Current Outlook and Bastiat's Broken Window | ||
| 2011-02-09 | February 9, 2011 - An Update Plus Mid February Odds and Ends | ||
| 2011-02-07 | February 7, 2011 - Measuring the Impact of "Strategic Defaults" and Mortgage Delinquencies on Consumer Spending | ||
| 2011-02-02 | February 2, 2011 - Answering More Questions about the Q4-2010 GDP Report (Ad Nauseam) | ||
| 2011-01-30 | January 30, 2011 - More Thoughts on the BEA's "Advance Estimate" for 4Q-2010 | ||
| 2011-01-29 | January 29, 2011 - What the BEA's Advance Estimate of Fourth Quarter 2010 GDP Was Really Telling Us | ||
| 2011-01-12 | January 12, 2011 - Reflecting Back on 2010 | ||
| 2011-01-10 | January 10, 2011 - Lessons from 2010 | ||
| 2010-12-29 | December 29, 2010 - Looking Back at Holiday Sales and the BEA's Third Estimate for Q3-2010 | ||
| 2010-12-14 | December 14, 2010 - Feeding the Holiday Sales Frenzy While Maintaining Perspective | ||
| 2010-12-07 | December 7, 2010 - Retail Updates, The Full Economy & GDP Revisited | ||
| 2010-12-01 | December 1, 2010 - "Black Friday" and "Cyber Monday" | ||
| 2010-11-23 | November 23, 2010 - First Revision to the Third Quarter GDP | ||
| 2010-11-22 | November 22, 2010 - Continued Modest Improvements in Our Weighted Composite Index | ||
| 2010-11-14 | November 14, 2010 - What Does the Bottom in the Daily Growth Index Mean? | ||
| 2010-11-09 | November 9, 2010 - Daily Growth Index Shows Signs of Bottom Forming | ||
| 2010-11-07 | November 7, 2010 - Revisiting the Character of the "Great Recession" | ||
| 2010-10-31 | October 31, 2010 - The End of Political "FUD" Approaches | ||
| 2010-10-29 | October 29, 2010 - Inside the Third Quarter GDP Release | ||
| 2010-10-25 | October 25, 2010 - Current Contraction Surpasses "Great Recession" | ||
| 2010-10-24 | October 24, 2010 - The U.S. Census Bureau's Retail Sales Report | ||
| 2010-10-17 | October 17, 2010 - Political "FUD" and the Consumer Psyche | ||
| 2010-10-10 | October 10, 2010 - Daily Growth Index Sets Record Low and Duration Marks | ||
| 2010-10-05 | October 5, 2010 - Inside the September GDP Revisions | ||
| 2010-10-03 | October 3, 2010 - Weakening Weighted Composite Pulls Daily Growth Index to All-Time Low | ||
| 2010-09-26 | September 26, 2010 - The Diverging GDP | ||
| 2010-09-22 | September 22, 2010 - NBER: Double Dip or Banana Split? | ||
| 2010-09-20 | September 20, 2010 - Thoughts on the Recent "Bottom" in our Weighted Composite Index | ||
| 2010-09-18 | September 18, 2010 - Has the Bottom Been Reached? | ||
| 2010-09-11 | September 11, 2010 - The Big Scoop and Housing | ||
| 2010-09-02 | September 2, 2010 - Autos, Personal Finance, and Refinancing | ||
| 2010-09-01 | September 1, 2010 - Viewing the "Great Recession" in Hi-Def | ||
| 2010-08-30 | August 30, 2010 - Taking a Closer Look at the "Great Recession" | ||
| 2010-08-28 | August 28, 2010 - Inside the BEA's Latest GDP Numbers | ||
| 2010-08-22 | August 22, 2010 - 75 Days of Fear, Uncertainty and Doubt | ||
| 2010-08-20 | August 20, 2010 - Politics and the Economy; Cause and Effect |
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| Economic Data for the 21st Century - Part 1 (Duration 7:35) | |
| Economic Data for the 21st Century - Part 2 (Duration 11:35) |
