Sickly second-quarter GDP report puts U.S. economic recovery — and Obama’s reelection — in jeopardy


The U.S. economy is not doing fine.

Earlier this year, the Obama White House predicted the economy would grow 3% in 2012. Today’s GDP report shows that ain’t going to happen. The Commerce Department said the economy grew at an anemic 1.5% annual rate from April through June, after a revised 2.0% in the first quarter. It now seems likely the economy will be lucky to grow at 2% for the entire year. And that’s after growing just 1.8% last year.

Indeed, research from the Federal Reserve finds that that since 1947, when year-over-year real GDP growth falls below 2%, recession follows within a year 70% of the time. The U.S. economy remains in the Recession Red Zone.

[UPDATE] Here is JPMorgan economist Michael Feroli:

Real GDP expanded at a mere 1.5% annual rate last quarter, and final sales creeped forward at only a 1.2% pace. That pace of growth is fairly pathetic, but close to subdued expectations.

The composition of growth last quarter implies some headaches for the economy in the second half: inventories were accumulated at a $66 billion annual rate, which is a rapid pace and implies that production will remain muted as firms work down excessive stockpiles.

Within the details of final demand, real consumer spending increased at a 1.5% rate, the second slowest quarter since 2009 but a little better than expectations. It appears much of the ‘surprise’ in consumption was due to a jump in utility outlays as weather patterns normalized last quarter.

What does all this mean? For our forecast, we continue to look for 1.5% growth in the third quarter. The strength in inventory accumulation last quarter, however, adds some downside risk to that projection. We suspect the Fed was likewise disappointed by the composition of growth last quarter. For next week, we think it’s a close call but that ultimately the FOMC will not initiate another round of large-scale asset purchases next Wednesday. We continue to believe that they will push back their low rate guidance from late 2014 to mid-2015.

The new data also show just how weak the Obama recovery has been, expanding at an annual average pace of just 2.2% vs. 5.7% for the Reagan recovery.

In addition, the GDP report shows the Obama administration has continually and wildly overestimated the positive impact of its economic policies, including the $800 billion stimulus plan:

– In August of 2009, the White House—after having a half year to view the economy and its $800 billion stimulus response—predicted that GDP would rise 4.3% in 2011, followed by 4.3% growth in 2012 and 2013, too. And 2014? Another year of 4.0% growth.

– In its 2010 forecast, the White House said it was looking for 3.5% GDP growth in 2012, followed by 4.4% in 2013, 4.3% in 2014.

– In its 2011 forecast, the White House predicted 3.1% growth in 2011, 4.0% in 2012 and 4.5% in 2013, 4.2% in 2014.

– In its most recent forecast, the White House predicted 3.0% growth this year and next, and then back to 4.0% after that. The current consensus is for 2013 growth to be a lot like 2012 growth.

And when you plug these new numbers into the election forecasting model of Yale University’s Ray Fair — assuming next quarter is no better than the past two — it shows a 4-point Mitt Romney victory over Barack Obama (in the two-party vote totals).

Some pundits will put a smiley face these numbers, saying a) at least the U.S. economy is growing and b) at least the U.S. economy is doing better than the EU economy. But that’s a case of lowering expectations. America should and can do better.

11 thoughts on “Sickly second-quarter GDP report puts U.S. economic recovery — and Obama’s reelection — in jeopardy

  1. the Elite probably already have the election decided through voter fraud (with help of rigged voting machines, including the ones run by Soros) so a “sickly second-quarter GDP” isn’t something that barry will give a second thought to.
    What he Might give a thought to is how the Elite are LETTING the media post info that he (barry) might not be ahead for the purpose of backing barry in a corner (before they throw him under the bus) so he’ll start WWIII.

    • In the tradition of Nixon with Kennedy, and being the more decent bunch, we usually let election theft slide “for the good of the country” giving us, for example, Senator Jackasss from Minnesota.

      This time we’ve got to go to the mat on every fraud — for the good of the country.

    • If the elite are deciding elections then that means they gave us the Democratic waves in 06 and 08 and the GOP wave in 2010. Either they are schizophrenic or they are not as in control as some would have us believe.

  2. It really doesn’t matter if the economy is growing or not. Obama has his base and they will vote for him irregardless of the economy or even their personal condition.

    The question is how do you remove the hold he has on people. His words are quite seductive, “the rich folks can be taxed more.” “somebody will always help you” “the food stamps will always be there”. Unless you change that condition he has decent shot at winning the election.

  3. your comparison of average economic growth in the two recoveries makes no sense: are you implying that both the depth and causes of the two recessions are even analogous. not likely.

    • Obamas claim that his recession was somehow completely unique was another Obama lie. The depth of the 2 recessions, Reagans and Obamas, as measured by both the fall in economic output, and the low point in unemployment, was about the same. In addition, Reagan had to contend with huge inflation and interest rates as well. The difference was Reagan freed the market and small business to recover, while Obama destroyed the private economy with regulations and relied on stimulus payments and bailouts to favored cronies.

  4. You write: “And when you plug these new numbers into the election forecasting model of Yale University’s Ray Fair — assuming next quarter is no better than the past two — it shows a 4-point Mitt Romney victory over Barack Obama (in the two-party vote totals).”

    But when you plug a 1.5% growth rate for 2012 into the model (along with 2Qs of +3.2% growth since Obama became president), you get: 50.21% of the two-party vote for Obama.

    • I’m not clear as to why 4Q2009 and 4Q2011 don’t count as +3.2% quarters in Fair’s model. But if you assume zero +3.2% quarters (as Fair does in his notes), then you do indeed get 48.2% for the president (two-party vote percentage).

  5. Why should it matter if Obamas economy is miserable, and constantly performs below his predictions. After all it is all Bush’s fault anyway. If by some miracle Obama wins again, and we fall into another recession, that will be Bush’s fault too, or perhaps the repub congress, for not spending the extra trillions he wants them to, and not passing his job killing tax hike. Our great leader never makes mistakes, and is never responsible for anything, haven’t you all learned that by now.

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