2nd Quarter GDP comes in at solid 3.4%

[Engineer]

Click me!

Seems that the economy still chugs along even with high energy prices. Nice to see unsold goods (inventories) drop fo the first time in 2 years.

Edit: I just noticed that 2002, 2003 and 2004 GDP's were revised downward. How many years do we continue to adjust these numbers? What do we know now that we didn't know then (when the numbers were released)?

Edit #2: Question. How does inflation relate to how GDP is calculated. Since GDP is the value of goods produced, does inflation drive up GDP numbers even if the same amount of items are produced? (Example: Company produced 100 items at $10 each = $1000. Next year, inflation of 3% drives price to $1030. Does the extra 30 in value give a GDP spurt of 3% also?). If the above example "is" true (big if), does that mean that the GDP number doesn't reflect true growth activity because it reflects inflation? I can't really see this happening, just a "what is" type of question.

WASHINGTON (Reuters) - The U.S. economy grew solidly at a 3.4 percent annual rate in the second quarter, the government reported on Friday, just slightly below the first quarter's pace and with room to grow as stocks of unsold goods fell for the first time in two years.

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While second-quarter growth eased from a 3.8 percent rate in the first three months of the year, it nonetheless marked the ninth straight quarter in which gross domestic product or GDP increased at a rate exceeding 3 percent, Commerce Department figures showed.

The first snapshot of second-quarter GDP matched Wall Street economists' expectations. The figure will be revised twice in coming months as more data on the economy's performance arrive.

GDP measures the value of all goods and services produced within U.S. borders.

Most measures of activity remained healthy in the second quarter, with consumer spending increasing at a 3.3 percent rate after growing at a 3.5 percent rate in the first quarter. Business investment advanced at a 9 percent rate after growing 5.7 percent in the first three months of the year.

Companies drew down inventories at a $6.4-billion annual rate during the second quarter -- the first time they reduced stocks since the second quarter of 2003 -- after boosting them by $58.2 billion in the first quarter. Much of the drawdown appeared to be related to carmakers clearing the way for new models but, in general, lower inventories leave room for companies to ramp up future production.

Overall prices kicked up in the second quarter, influenced by more expensive oil and gasoline. A personal consumption expenditures gauge that is often taken as a measure of inflation climbed at a 3.3 percent rate that topped the first quarter's 2.3 percent and represented the strongest rate of prices gain in a year.

But excluding volatile food and energy costs, the PCE gauge was up at a more modest 1.8 percent rate, actually lower than the first quarter's 2.4 percent.

The second-quarter GDP data also included annual revisions reaching back to the beginning of 2002. They showed a weaker recovery from a relatively mild recession in 2001 than previously thought, but did not change the pattern of growth as the recovery heads toward its fourth anniversary in the final quarter this year.

The revised data showed GDP growth in 2004 was 4.2 percent, rather than 4.4 percent, 2003 growth was 2.7 percent not 3 percent and 2002 growth was 1.6 percent rather than 1.9 percent

 

[nick1985]

:thumbsup:

 

[zendari]

Originally posted by: nick1985
:thumbsup:

 

[Jhhnn]

Heh. Interesting question about the revisions, Engineer. Maybe moving older figures downward allows for today's inflated numbers to more accurately reflect where we're at...

One of those revisionist history deals- it was worse in the past than we thought, but it's much better now...

 

[dullard]

GDP (Sometimes called nominal GDP): not adjusted for inflation. Thus your example of prices going up 3% means GDP goes up 3% if the same amount of goods are produced.

Real GDP: adjusted for inflation.

Link.

This is a subtle fact that most people don't understand. You have to be very careful when using GDP numbers to see if they are using "GDP" or "Real GDP".

 

[Engineer]

Originally posted by: dullard
GDP (Sometimes called nominal GDP): not adjusted for inflation. Thus your example of prices going up 3% means GDP goes up 3% if the same amount of goods are produced.

Real GDP: adjusted for inflation.

Link.

This is a subtle fact that most people don't understand. You have to be very careful when using GDP numbers to see if they are using "GDP" or "Real GDP".

Are the numbers above (3.4%) real or nominal?

 

[dullard]

As for the revisions, that has to happen since people and businesses revise their tax numbers.

The 3.4% number you just posted is based largely on estimates. No one has actually seen all of the numbers yet and the missing information must be estimated. It will be revised to a much more accurate number next quarter when most of the real numbers have finally been seen.

However, there are still many people/businesses that won't have their true 1st quarter numbers ready for quite some time. Suppose you have a complicated tax problem that appears and there isn't time for you or your accountant to do the work. You can file an extension. To avoid penalties, the tax is due, but you don't actually calculate how much tax you owe until later. So, many people will overpay and revise later. Others won't pay and will pay penalties later. You have several months for extensions.

Finally, you have 3 years (if I recall correctly) to revise any tax numbers. Suppose you goofed (or maybe even illegally did your taxes). You can resubmit the more accurate numbers. As the US numbers get resubmitted, the GDP calculations are adjusted (up to 3 years I think).

 

[dullard]

Originally posted by: Engineer
Are the numbers above (3.4%) real or nominal?

According to this, those are the real GDP numbers. And the nominal GDP growth was 5.9% for the 2nd quarter.

Of course, you can go one step further. You can adjust for population growth. If the real GDP went up 3% a year and US population went up 3% per year, then per capita we aren't any better off.

Note: from 1990 to 2000, the total US population averaged a yearly 1.22% growth.

 

[dmcowen674]

Originally posted by: dullard

Originally posted by: Engineer
Are the numbers above (3.4%) real or nominal?

According to this, those are the real GDP numbers. And the nominal GDP growth was 5.9% for the 2nd quarter.

Of course, you can go one step further. You can adjust for population growth. If the real GDP went up 3% a year and US population went up 3% per year, then per capita we aren't any better off.

Note: from 1990 to 2000, the total US population averaged a yearly 1.22% growth.

Originally posted by: Engineer
Click me!

I just noticed that 2002, 2003 and 2004 GDP's were revised downward.

How many years do we continue to adjust these numbers?

What do we know now that we didn't know then (when the numbers were released)?


Only during the years the Bush Regime remains in power.