Tuesday, November 22, 2011

Pathetic spinning of pathetic GDP numbers

New estimates of annualized real GDP show third quarter real growth of 2%.  This is a downward revision of the advance estimate, which pegged real growth for the third quarter at 2.5%.  For reference, here are records of the Obama Recovery of 2009-11 and the Reagan Recovery of 1982-84 for the first 9 months of positive real growth.

By this stage in 1984 the economy had grown by 12.9% above its end-of-recession level.  In contrast, third quarter 2011 real GDP is only 5.4 percent above the end-of-recession level.

Reuters, which is already in Presidential-election mode, tried its best to put a positive spin on the downward revision. To Reuters, the "economy grew at a slightly slower pace than previously estimated in the third quarter" and "the first drop in businesses inventories since the fourth quarter of 2009 appeared to set the stage for a stronger economic performance this quarter."  So, in Reuterville a big downgrade in the estimate of inventory-building is a sign of good things to come and not a sign that businesses don't think they need big inventories?

They go on to editorialize that "(d)espite the downward revision, last quarter’s growth is still a step up from the April-June period’s 1.3 percent pace."  So, an drop of 0.5 is "slight" but an increase of 0.7 is a "step up"?  The difference between 0.5 and 0.7 is much larger than the measurement error.

Despite Reuter's heroic efforts, there is no good spin to put on the level of growth or on the downward revision.  The economy is performing very poorly and all signs point to it not getting much better.