Thursday, July 30, 2015


The BEA released the advance estimate of second quarter GDP growth today: the good news is that US output grew at a 2.3% annual rate in the period - a healthy, though unspectacular, pace.  The growth was largely driven by consumption (about 70% of GDP), which grew at a 2.9% rate.  Also, the BEA revised up its estimate of growth in first quarter to an 0.6% rate, from -0.2% in the previous release.

The more disappointing news came in the "annual revision" of estimates for 2012-2014 which were included in today's release.  The new estimates indicate that the agonizingly slow recovery has been a little more sluggish than we previously thought - GDP growth was revised downwards 0.1pt for 2012 and 0.7pt for 2013.
The red line shows the revised figures, the blue line is the previous estimate.  The lower estimates of output growth also imply that labor productivity - output per unit of labor - growth was a little slower than previously thought.  Since labor productivity is the main determinant of changes in living standards over time, further evidence that it has shifted to a lower trend is a discouraging indication about long-run prospects.

This release also had an interesting wrinkle: the BEA is also now releasing the average of the standard expenditure-based GDP figure and the income-based measure (which it calls Gross Domestic Income).  In principle, they should be the same, but, in practice, there is usually a "statistical discrepancy."  This issue brief from the Council of Economic Advisors explains why the average - which its calling "Gross Domestic Output" (we'll see if that sticks...) might be a better indicator.

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