Comment on Revised U.S. GDP Figures

June 29, 2017

According to revised figures, real GDP expanded 1.4% at an annualized rate between the last quarter of 2016 and the first quarter of 2017. The initial estimate of 0.7% was revised a month ago to 1.2%. Personal consumption (up 1.1% annualized), non-residential business investment (10.4%) and residential construction (13.0%) collectively augmented real GDP growth by 2.5 percentage points, but government expenditures and business inventories both contracted, erasing 1-1/4 percentage points of economic growth. Net foreign demand contributed about a quarter percentage point of GDP growth.

Donald Trump is the fourth straight presidency to start off with weak growth in its first calendar quarter. His three predecessors had even worse luck. Real growth contracted 5.4% annualized (AR) in the first quarter of Obama’s presidency, grew 1.1% AR in Bush43’s first quarter, and rose 0.8% in Clinton’s first quarter. Previously, U.S. real economic growth had expanded by 4.1% AR, 8.5% AR, 4.7% AR, 6.4% AR, 2.9% AR, 2.8% AR and 7.7% AR in the initial quarters of the Bush41, Reagan, Carter, Nixon, Johnson, Kennedy and Eisenhower stewardships. Embedded in that sequence, Ford pulled a short straw, as the economy contracted 3.8% AR in the third quarter of 1974.

U.S. real GDP climbed 2.1% between the first quarters of 2017 and 2017, in between on-year growth of 1.6% in 1Q16 and 3.3% in 1Q15. From the last quarter of 1949 to the last quarter of 1999, the economy expanded at an average rate of 3.7% per year. But over the 17-1/4 years since 4Q99, average growth has been only half as strong at 1.8% per annum.

America’s current on-year growth of 2.1% places it near to concurrent growth of 1.9% in the euro area, 2.0% in the U.K., 2.3% in Canada, and 1.7% in Australia. Growth rates between 1Q16 and 1Q17 of 1.3% in Japan, 1.1% in Colombia, 1.0% in South Africa, 0.8% in Greece, 0.5% in Russia, and 0.3% in Argentina was even slower, and GDP in Venezuela and Brazil in fact contracted in that period. By contrast, GDP advanced between 6% and 7% in China, The Philippines and India and by between 2.5% and 4.5% in Mexico, Taiwan, Thailand, Hong Kong and South Korea.

The United States was not alone among industrialized economies in posting a low rate of quarter-on-quarter growth during 1Q17. Growth in Australia, Japan, and the U.K. rose 1.1%, 1.0%, and 0.7% annualized.

Like the rate of real GDP growth, nominal GDP expanded only half as quickly this century as the pace set in the second half of the last one. From 4Q49 to 4Q99, nominal GDP had expanded 7.5% per annum, but that pace has dropped to an average of 3.8% per year since the last quarter of 1999.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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