Economics, U.S. Economy

2Q growth numbers indicate a US recession is on the way

Image Credit: Shutterstock

Image Credit: Shutterstock

Q2 ’13 growth — with benchmark revisions — is weak. The 1.7% growth number was above the consensus 0.8% but was weaker than headline for three reasons:

1.Inventories — unsold goods — contributed 0.41 percentage points. Final sales rose by just 1.29%. The inventory accumulation will be a drag on future growth.

2. Q1 ’13 growth was revised down from 1.8% to 1.1% (with final sales just 0.17% — virtually flat). The lower Q1 ’13 base (1.8 minus 1.1 equals 0.7) flattered the Q2 ’13 growth number by 0.7 percentage points.

3. Adjusting for inventories and revisions, the Q2 ’13 SAAR growth number was 0.59% adjusted Q2 ’13 growth (1.7 minus 0.41 for inventories minus 0.7 for Q1 revisions equals 0.59%).

Overall, today’s low-but-actually-lower GDP growth numbers pull the US economy down to stall speed. Given the ongoing drag from Q2 inventory build, fiscal austerity, weaker global growth, and higher, taper-talk-driven interest rates, we could well see negative second-half growth.

That defines a recession.

3 thoughts on “2Q growth numbers indicate a US recession is on the way

  1. ALRIGHT DAMMIT……just yesterday or the day before in an argument to defend the fed this site ran an article about good growth, which isn’t occuring, average work week “stability” etc etc.

    You folks need to get on the same page and get with the program.

  2. A recession ‘might be coming’? If the BLS used the same methodology that it had used before the Clinton administration changed the methodology you would find that the US has been in recession for quite some time.

    • sumner already let the cat out of the bag when he introduced 5.5% as basically full employment with his “potential” reasoning. No not, 4%, but 5.5 …………we call this setting up a premise. NORMALIZATION.

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