Sunday, October 28, 2012

US Q3 GDP: Good News in the Headline but Bad News in the Details

We all breathed a sigh of relief when yesterday’s advance estimate of U.S. Q3 GDP showed the economy growing at an annual rate of 2 percent. In normal times, 2 percent would be a disappointment; it is a sign of how far we are from normal that we can only think how much worse it could have been.

In fact, it could yet be worse. The advance estimate of real GDP is notoriously subject to revision. The BEA tells us that the average revision, without regard to sign, is 1.3 percentage points from the advance to the latest estimate. A downward revision of no more than average size would put us at 0.7 percent growth, well below the anemic 1.3 percent reported in the third estimate for Q2. Of course, an upward revision is, statistically, equally likely, so let’s hope for the best.

Even as we accept 2 percent growth with relief, there are some discouraging details deeper in the tables that the BEA attaches to its press release. >>>Read more

Follow this link to view or download a classroom-ready slideshow with charts of the latest GDP data

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