Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

U.S. Real GDP Revisions Indicate Economy Still in Recovery Phase

Economics / US Economy Jul 31, 2011 - 03:32 AM GMT

By: Asha_Bangalore

Economics

Diamond Rated - Best Financial Markets Analysis ArticleThe U.S. economy grew at an annual rate of 1.3% in the second quarter after a downwardly revised 0.4% increase in the first quarter (previously estimated to have increased 1.9%). From a year ago, real GDP advanced only 1.6%, the smallest increase in the current recovery.


Annual benchmark revisions indicate that the Great Recession has recorded a deeper decline in real GDP (-5.1%) during 2007:Q4 to 2009:Q2 compared with the prior estimate (-4.1%). Revisions also point to the fact that the U.S. economy is still in the recovery phase (see Chart 2). Previous estimates had shown that the economy entered an expansionary phase in the first quarter of 2011.

Consumer spending held nearly steady in the second quarter, equipment and software spending rose 5.7% in the same period. But, both of these components of real GDP show a slowing trend (see Chart 3).

The 3.8% increase in residential investment expenditures was a surprise; however, on a year-to-year basis, residential investment outlays remain negative.

Exports rose at an annual rate of 6.0% in the first quarter, representing a slowing trend on a year ago basis. Federal government spending shows a sharp deceleration on a year basis (see Chart 6). Further cutbacks in federal government spending should translate into trimming headline real GDP growth in the quarters ahead after a soft patch in the first-half of 2011.

The overall GDP price index moved up at an annual rate of 2.3% in the second quarter vs. a 2.5% gain in the first three months of the year. The personal consumption price index, which the Fed tracks closely, increased 3.1% in the second quarter vs. 3.9% in the first quarter, reflecting the moderation in energy prices. The core personal consumption expenditure price index, which excludes food and energy, rose 2.1% in the second quarter vs. a 1.6% reading in the first quarter. This price measure is at the top of the Fed’s threshold of tolerance. Given projections of economic growth that are below potential in the second-half of 2011, inflation measures are predicted to show a moderating trend. Inflation expectations have moved up slightly in recent days (2.11% as of July 28, 2011, see Chart 8) but the level is still noticeably below the recent high of 2.45%. Inflation expectations are not indicative of impending inflationary pressures; thus, allowing the Fed to watch and wait.

The Fed is on hold in the near term, given that QE2 (quantitative easing) has been completed as of June 2011. Today’s second quarter GDP report and downward revisions of the prior quarters suggest that the economic recovery is fragile and the sub-par performance could require additional monetary policy support in the near term. Another round of quantitative easing by year-end is entirely conceivable if economic growth remains soft.

In In related news, the Employment Cost Index (ECI) rose 0.7% during the second quarter, matching the increase seen in the prior quarter. Benefit costs advanced 1.3% in the second quarter, after a 1.1% gain in the first quarter. Benefit costs have accelerated from a 2.5% increase in the second quarter of 2010 to a 3.6% jump in second quarter of 2011 (see Chart 9). Wages and salaries have held in the 1.5% - 1.6% range for almost two years (see Chart 9). Total employment costs have risen gradually over the past year to record a 2.2% year-to-year gain in the second quarter of 2011 compared with a 1.9% gain in the second quarter of 2010 (see Chart 9). The bottom line is that employment costs are not threatening inflationary pressures, for now. If the economy were to gather strong momentum during the second-half of the year, this contained employee cost scenario could change.

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2011 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules