James Pethokoukis
AEIdeas
American Enterprise Institute
9/27/2012
…GDP growth for the second quarter was revised down to 1.25%. Here is Reuters:
Economic growth was much weaker than previously estimated in the second quarter as a drought cut into inventories, setting the platform for an even more sluggish performance in the current quarter against the backdrop of slowing factory activity.
Gross domestic product expanded at a 1.3 percent annual rate, the slowest pace since the third quarter of 2011 and down from last month’s 1.7 percent estimate, the Commerce Department said in its final estimate on Thursday.
Output was also revised down to reflect weaker rates of consumer and business spending than previously estimated. Outlays on residential construction export growth were also not as robust as had been previously estimated.
Data in hand for the third-quarter suggest little improvement in the growth pace, even as the housing market digs out of a six-year slump. Manufacturing, the pillar of the recovery from the 2007-09 recession is cooling, hurt by fears of tighter U.S. fiscal policy in January and slower global demand.
U.S. economic growth is dangerously slow. I’ve frequently written about research from the Fed which finds that since 1947, when two-quarter annualized real GDP growth falls below 2%, recession follows within a year 48% of the time. And when year-over-year real GDP growth falls below 2%, recession follows within a year 70% of the time.
Citigroup has also taken a shot at determining the stall speed: “Specifically, when U.S. growth has cut below 1½ percent on a rolling four-quarter basis, it has tended to fall by nearly 3 percentage points over the following four quarters, and the economy has typically entered recession.
Bottom line: Growth the past two quarters has averaged about 1.6%. Not only does this mean the economy is growing more slowly than last year’s 1.8%, it is also slow enough to signal about a 50% chance of a recession within a year. And the third quarter also looks weak.
The anemic, three-year-old U.S. recovery is already running out of steam. And if it does, it may be several more years before we see unemployment below 8%…
The complete article, with graphics, is at AEIdeas.
Related: U.S. Economy Grew 1.3 Percent Rate in Second Quarter
Durable goods drop worst since recession
…The Commerce Department said on Thursday durable goods orders dived 13.2 percent, the largest drop since January 2009, when the economy was in the throes of a recession. Orders for July were revised down to show a 3.3 percent increase instead of the previously reported 4.1 percent gain…
Update: Ryan: “This is not what a real recovery looks like”
…59.4 percent of Americans were employed in the final days of the official recession. Just last month, that number was only 58.3 percent. So, in a nutshell, since the end of the recession, Americans’ real annual household income and the number of employed Americans have both declined…
Update 2: 43% Expect Better Economy if Romney Wins; 34% Say Same of Obama Rasmussen Reports
Fifty-five percent of small business owners would not start a business today, survey says
Fifty-five percent of small business owners say they would not start a new business today, according to a new industry survey.
An even larger majority of manufacturers and small business owners, 69 percent, blame the Obama administration’s regulatory policies for hurting their sectors of the economy…
Soros: China’s Use of Undervalued Currency Coming to End
China’s strategy of using an “undervalued currency” and building currency reserves to fuel growth has come to an end, billionaire investor George Soros said at an event in New York Wednesday.
“The growth model that has been driving it has been exhausted,” Soros said. “They have to change.”
Slower growth “will be big, big trouble for political leaders because growth has been reinforcing the power of central government,” Soros said.
