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Reason Foundation

GDP Continues Its Fall to 1.3%, Key Statements in the BEA Report

Anthony Randazzo
July 29, 2011, 11:13am

Second quarter GDP numbers are in, and they are not pretty. By now you have probably seen the headline numbers: 1.3% annualized gross domestic product growth between April and June 2011.

That is a very weak number. It is lower than anticipated—not that "economists" have been very accurate in their predictions of economic growth this year. But even more disconcerting, the growth rate for GDP in the first three months of 2011 was reviewed, and downgraded from 1.9% to a mere 0.4%. To make it worse, the Bureau of Economic Analysis also took another look at GDP for the last three months of 2010, and lowered the GDP number from 3.1% to 2.3%!

In short, the fauxcovery is in full form. It is hard to even call this a jobless recovery, since there isn't much recovery. Economic slow down later this year will probably be blamed on the end of the stimulus, but what is it doing right now anyway? Is there strong correlation between GDP and outlays? Not really. And the Fed has tried to blame slow economic growth on the Arab Spring pushing up oil prices and the 2011 Japanese earthquake slowing down supply chain routes, but this trend stems back at least to last Fall. With that in mind, here are a few key statements from the GDP report this morning:

Ultimately, GDP is not a perfect measure of the economy. In fact it is quite flawed. But most of its flaws are due to over statement, not understatement. So if anything this dreary analysis is too rosy. Still, it is an indicator worth watching to develop some sense of where the economy is heading. When the stimulus, cash for clunkers, quantitative easing, and housing programs were all initiated a couple years ago was this the intended goal?

Anthony Randazzo is Director of Economic Research

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