Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.5 percent in the second quarter of 2012, (that is, from the first quarter to the second quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 2.0 percent.
It’s “not as bad” as some people were expected, so the market was rather “ho-hum” after it came out. But the fact is that inside the release are some truly disturbing numbers, and this is being reflected in some of the earnings reports — which are showing an uttercollapse in June among retail behavior.
(How this comes as a surprise, incidentally, is beyond me. I noted it immediately during my usual summer jaunt; places that should have been “humming” the last week of June, in front of the July 4th Holiday, were ho-hum or worse, flat dead.)
Let’s look inside.
The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 0.7 percent in the second quarter, compared with an increase of 2.5 percent in the first. Excluding food and energy prices, the price index for gross domestic purchases increased 1.4 percent in the second quarter, compared with an increase of 2.4 percent in the first.
No news here. Energy prices were down materially in the second quarter. Food in recent times has been sedate, but it won’t be for long given the drought. In the short term the drought will drive meat producers to slaughter ahead as they can’t afford to continue to feed, which means that pork and beef prices should fall for a short time. But anything grain-based (e.g. corn, wheat, etc) is going up in price now, as are those items that are short-pass-through time (e.g. dairy) and on the back end meat will skyrocket as well. The next 12-18 months are going to be bad on the food inflation side, with the worst of it being next year.
Real personal consumption expenditures increased 1.5 percent in the second quarter, compared with an increase of 2.4 percent in the first. Durable goods decreased 1.0 percent, in contrast to an increase of 11.5 percent. Nondurable goods increased 1.5 percent, compared with an increase of 1.6 percent. Services increased 1.9 percent, compared with an increase of 1.3.
This number is just plain bad. If June was responsible for most of this then June was probably negative, and that means that 3Q will be very close to zero. More importantly durables purchases essentially collapsed. The saving grace? Services — for now — but remember that Richmond’s numbers went into the toilet this last month and that’s not in these numbers.
It will be next quarter.
Real federal government consumption expenditures and gross investment decreased 0.4 percent in the second quarter, compared with a decrease of 4.2 percent in the first. National defense decreased 0.4 percent, compared with a decrease of 7.1 percent. Nondefense decreased 0.3 percent, in contrast to an increase of 1.8 percent. Real state and local government consumption expenditures and gross investment decreased 2.1 percent, compared with a decrease of 2.2.
Government’s drag was smaller this quarter than last. This is particularly bad — government was unable to hand off its deficit spending to the private sector. That is, net-net government was a help and yet the headline number was still down. This is particularly important when one considers that government is ~25% of GDP.
Current-dollar personal income increased $140.5 billion (4.3 percent) in the second quarter, compared with an increase of $199.9 billion (6.3 percent) in the first.
Personal current taxes increased $24.9 billion in the second quarter, compared with an increase of $30.0 billion in the first.
Disposable personal income increased $115.6 billion (4.0 percent) in the second quarter, compared with an increase of $169.9 billion (6.0 percent) in the first. Real disposable personal income increased 3.2 percent, compared with an increase of 3.4 percent.
Personal outlays increased $59.9 billion (2.1 percent) in the second quarter, compared with an increase of $143.1 billion (5.2 percent) in the first. Personal saving — disposable personal income less personal outlays — was $475.3 billion in the second quarter, compared with $419.5 billion in the first. The personal saving rate — saving as a percentage of disposable personal income — was 4.0 percent in the second quarter, compared with 3.6 percent in the first. For a comparison of personal saving in BEA’s national income and product accounts with personal saving in the Federal Reserve Board’s flow of funds accounts and data on changes in net worth, go towww.bea.gov/national/nipaweb/Nipa-Frb.asp.
I’m not sure I buy this set of data given the consumption numbers, but this is what’s being reported. I guess all we can do is wait for the personal income and spending reports and see if we can find evidence that this isn’t some form of book-cooking.
Along with this release routine revisions were also made going back into the 2009 time frame. These annual revisions are routine and done every July; I didn’t see anything that stuck out as particularly noteworthy. I’m sure the conspiracy theorists will find something in there to comment on, but I’ll pass on it.