US GDP Growth Revised Up to 2.5 Percent on Stronger Exports; Inflation Falls

The Bureau of Economic Analysis reported today that the U.S. economy grew at an annual rate of 2.5 percent in the second quarter of 2013. The advance estimate for Q2, released last month, had shown a 1.7 percent growth rate. Higher exports and lower imports were a major factor behind the stronger growth estimate. As the following chart shows, Q2 growth appears to have picked up from its slower pace in Q4 2012 and Q1 2013. The Q2 data are subject to further revision in a third estimate that the BEA will release next month.

The next table breaks the latest growth data down according to the contributions of each major sector of the economy. The contribution of consumption expenditure was essentially unchanged at 1.21 percentage points, a little slower than the average growth of consumption over the previous eight quarters. Investment contributed a little more to growth than previously reported, but the upward revision was entirely attributable to higher nonfarm inventory investment. Inventory investment is an ambiguous indicator. Higher inventory investment can indicate either that firms are optimistically stocking up in anticipation of stronger future sales, or that goods they had planned to sell were unexpectedly piling up in warehouses and store shelves because of disappointing demand. >>>Read More

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

Alexei Navalny: To Change Russia's Economy, Start with Moscow

Alexei Navalny, lawyer, blogger, and opposition activist, has a simple slogan for his campaign to become mayor of Moscow: Change Russia, start with Moscow. His program urges a broad spectrum of changes to legal, political, educational, and healthcare systems, but reform of Moscow’s and Russia’s economy underlie all of them.
Russia’s economy certainly could use a shot in the arm. When Vladimir Putin first became president of Russia, the economy was just beginning to emerge from the chaos of the 1990s. Putin promised, rashly, to double GDP in ten years. If you pick the right measure of GDP and the right years, he managed to do it. (See this earlier post for details.) However, as the next chart shows, the Russian economy was hit hard by the global crisis. In its best post-recovery year, 2010, it grew at barely half the pre-crisis average. Year-on-year growth of real GDP through the second quarter of 2013 has been just 1.2 percent. The economy may have technically entered a recession in the second quarter, although Bloomberg quotes Deputy Economy Minister Andrei  Klepach as saying that there was no recession, only stagnation.



What could the mayor of Moscow do about Russia’s GDP? More than one might think. For one thing, the city of Moscow, all by itself, accounts for a quarter of the country’s economic output—about the same share as the top 20 U.S. cities contribute to the American economy. More importantly, though, Moscow exhibits all of Russia’s economic ills in microcosm. Change there really could spark change throughout the country. >>>Read more

How Fuel Subsidies Around the World Burden the Rich and the Poor Alike, with Lessons for the US

I have posted frequently (most recently in a three-part series that starts here) on the topic of underpricing of energy in the United States, but we are not the only offender. Many countries around the world subsidize consumer energy prices in ways that bring them to levels even lower than what U.S. consumers pay. These policies burden the rich and the poor alike—rich countries like Saudi Arabia and poor ones like Egypt, and within each country, both rich and poor citizens.

How subsidies hurt the poor

Fuel subsidies both help and hurt consumers. The trouble is that poor consumers get a disproportionately small portion of the help and a disproportionately larger share of the hurt.
The help comes because subsidies make fuels more affordable. That not only reduces direct costs for cooking and lighting, but also indirectly holds other prices down, for example, by reducing transportation costs for food. For individual families, the price reductions can be most welcome. For example, a study by Arze del Granado and others, cited by the IMF study, found that an increase of $.25 per liter in the price of fuel would reduce the real purchasing power of a poor household by more than 5 percent. >>>Read more

US Unemployment Rate Falls to 7.4 Percent in July, a New Low for the Recovery

The latest data released by the Bureau of Labor Statistics show the US labor market continuing to recover. The unemployment rate fell to 7.4 percent, a new low for the recovery. Payroll jobs increased by a moderate 162,000, as shown in the following chart. May and June job gains were revised downward.


Payroll job increases were concentrated in service sectors, with retail trade, leisure and hospitality, and business services all showing strong growth. Goods producing industries gained slightly, with job losses in construction more than offset by gains in manufacturing. The government sector showed a rare increase in jobs, most of them in at the local level. Federal and state governments employed fewer workers in July. As the following chart shows, the long decline in total government employment appears to be tapering off. >>Read more

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

How GDP Revisions Change Our Picture of the Great Recession: The Story in Charts

On July 31, the Bureau of Economic Analysis released revised data for US national income accounts. The revised data give us a new view of the Great Recession that began at the end of 2007. It still merits its name as the most severe economic downturn since the Great Depression of the 1930s, but the contraction now looks a little shallower than previously thought and the recovery a little more robust.

The following chart compares the old and revised real GDP data over the past six years. The old and new data series are not directly comparable. Not only was the old series stated in 2005 dollars and the new in 2009 dollars, but there are numerous statistical and methodological differences as well, as discussed below. For easier comparison, then, the chart displays both the old and new data in the form of an index with the peak of the previous cycle, Q4 2007, equal to 100.

Several features stand out in the chart. First, the contraction from peak to trough was not quite as deep as reported earlier. Instead of falling by 4.7 percent, real output fell by 4.3 percent. Beginning from the trough, which came in Q2 2009 in both series, the expansion is somewhat stronger according to the new data, especially in 2011. From Q1 2011 to Q1 2012, the economy is now seen to have grown by 3.3 percent rather than the previously reported 2.5 percent. By Q1 2013, real GDP was 3.9 percent above the previous peak, rather than just 3 percent, as reported earlier. >>>Read more and view the rest of the charts

US GDP Grows 1.7 Percent in Q2, Beating Expectations, Major Revision to Earlier Quarters

The Bureau of Economic Analysis today released its much anticipated advance estimate of second quarter GDP growth, along with rebenchmarked data for earlier quarters. Q2 growth was reported as 1.7 percent, hardly scintillating, but better than some analysts had expected. However, growth for Q1 was revised down from 1.8 percent to just 1.1 percent, and Q4 2012 was revised down from a feeble 0.4 percent to a near standstill at 0.1 percent. All the numbers are quarterly data stated at annual rates.
The best way to see what has been going on since the first of the year is to look at the old, the rebenchmarked, and the newly revised data on a sector-by-sector basis, as in the following table:



The first thing we see in this table is that the contribution of consumption to real GDP growth slowed from  1.54 percentage points in Q1 2013 to 1.22 percentage points in Q2. Q1 consumption, in turn, was revised downward from a contribution of 1.83 percentage points. Consumption of durable goods picked up slightly in Q2. The slowdown was about evenly divided between services and nondurable goods.>>>Read more

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