I know I said I’d be on vacation, but thanks to 3G coverage, I can add this item today. The second revision of 1st qtr GDP 2010 GDP growth rate was announced. It’s revised down again, and it still looks like it’s mostly all the result of inventory accumulation. So we have GDP = C + planned Investment + unplanned Inventory accumulation + G + net exports. And the major reason the overall number is up 2.7% is due to unplanned Inventory accumulation. We need C and planned Investment to increase — that’s a healthy economy. But it wasn’t happening in 1st qtr and it looks like things have slipped or slowed since 1st quarter. So I’m raising my estimate of the chances of a double-dip recession with negative GDP growth in the second half of 2010 to 50% or maybe 60%.
See Calculated Risk:
The Q1 real GDP rate was revised down again (third estimate) to 2.7% from the 2nd estimate of 3.0%.
Consumer spending was weaker in Q1 than originally estimated. PCE growth (personal consumption expenditures) was revised down to 3.0% in Q1 from the previous estimate of 3.5%.
Some more from Reuters: Economy Grew Slower in First Quarter than Expected, Up 2.7%
… business spending, which only rose at a 2.2 percent rate instead of 3.1 percent as reported last month. This was as a spending on structures was revised down to show a slightly bigger decline than reported last month. Growth in software and equipment investment was also lowered to a 11.4 percent rate from 12.7 percent.
Another drag on growth came from exports whose growth was eclipsed by a rise in imports, resulting in a trade deficit that subtracted from GDP.
… real final sales to domestic purchasers, considered a better measure of domestic demand, rose at a 1.6 percent rate instead of the 2.0 percent pace reported last month.
The “Change in private inventories” was revised up to a contribution of 1.88% from the previous estimate of 1.65%. So inventory adjustment accounted for over two-thirds of the GDP growth in Q1 – and the inventory adjustment appears over. This is a weak third estimate.
Posted by CalculatedRisk on 6/25/2010 08:32:00 AM