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US 2nd-Quarter GDP Exceeds Pre-Pandemic High But Huge Concerns Remain

US GDP advanced above the 2019 Q4 high gaining 6.5% seasonally-adjusted annualized.
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Real GDP in Billions of Dollars 2021 Q2 Preliminary

Real GDP Percent Changes

Real GDP Percent Changes Three Ways 2021 Q2 Preliminary

Consumer Metrics Institute Analysis

  • Consumer spending for goods was reported to be growing at a 2.68% rate, down -3.01 pp from the prior quarter.
  • The contribution to the headline from consumer spending on services was reported to be 5.10%, up 3.35pp from the prior quarter. The combined consumer contribution to the headline number was 7.78%, up 0.34pp from the prior quarter.
  • The headline contribution for commercial/private fixed investments was reported to be 0.57%, down -1.68pp from the prior quarter.
  • Inventories subtracted -1.13% from the headline number, up 1.49pp from the prior quarter. 
  • The contribution to the headline from governmental spending was reported to be -0.27%, down -1.04pp from the prior quarter.
  • The contribution from exports was reported to be 0.64%, up 0.94pp from the prior quarter.
  • Imports subtracted -1.09% annualized 'growth' from the headline number, up 0.17pp from the prior quarter. Foreign trade contributed a net -0.45pp to the headline number.
  • The annualized growth in the 'real final sales of domestic product' was reported to be 7.63%, down -1.27pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).
  • For this estimate the BEA assumed an effective annualized deflator of 6.12%. During the same quarter the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was substantially higher at 9.68%. Under estimating inflation results in optimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been essentially cut in half to 3.33%.
  • Real per-capita annualized disposable income was reported to have decreased by $4,584 quarter to quarter. 
  • The annualized household savings rate was 10.9% (down -10.6pp from the prior quarter). In the 52 quarters since 2Q-2008 the cumulative annualized growth rate for real per-capita disposable income has been 1.62%.

The above thanks to Rick Davis at the Consumer Metrics Institute.

An Excellent Quarter?

6.5% annualized growth (1.6% quarter-over-quarter) would be an excellent number. However, economists expected more. 

The Blue Chip forecast was over 9.0% and the the Bloomberg Econoday Consensus was 8.0% in a range of 5.6% to 9.5%.

GDPNow hit the number almost on the head, Its estimate was 6.4%. 

What About the Unemployed and Service Disruptions?

Yesterday, I commented Expect a New GDP High Tomorrow, For Millions, It Won't Feel Like It

Millions of people are unemployed even as the food and service industries struggle to find workers.

Three rounds of stimulus fueled the recovery and in many cases people got paid more to be unemployed than they made working.

That ends in September. 

What About Inflation?

RECOMMENDED ARTICLES

Powell insists inflation is transitory. However, yesterday he admitted Inflation Might be Higher and More Persistent Than The Fed Expects.

Inflation might be transitory, or not. 

The Stagflation Threat is Very Real but Congress Holds the Key

The Democrat's $3.5 trillion "American Jobs Plan" is loaded with socialist items that would slow growth and raise taxes. 

It's difficult to predict an economic path because the path for that package is itself uncertain.  

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