Friday, October 29, 2010

Average GDP Growth of 2.81% Over Last 5 Quarters Compares Favorably to the Last Two Expansions

We're now in the fifth quarter of economic expansion since the recession officially ended in June 2009.  How does this economic expansion compare to the last two?  Most reports describe the recovery as "sub-par," "weak," "fragile," and "anemic," etc.  

And yet real GDP growth over the last five quarters of expansion (1.6%, 5%, 3.7%, 1.7% and 2% for an average of 2.81%) compares very favorably with the five-quarter periods following the 2001 recession (3.5%, 2.1%, 2%, 0.1% and 1.6%, for an average of 1.87%) and the 1990-1991 recession (2.7%, 1.7%, 1.6%, 4.5% and 4.3% for an average of 2.96%).  Based on average real GDP growth (subject to revisions of third quarter GDP) for the five quarters following recession, this expansion is stronger than the 2002 expansion by almost a full percentage point (2.81% vs. 1.87%), and just slightly below the 1991-1992 period (2.96%). 


20 Comments:

At 10/29/2010 9:49 AM, Blogger morganovich said...

i don't think that's a very apt comparison.

those were two very mild recessions.

this was clearly a severe one.

if you compare this recovery to those from serious recessions like 81, 74, 58, 54, or 48, it looks like a VERY weak recovery in comparison. it's roughly 50% weaker than those recoveries despite this recession been deeper.

 
At 10/29/2010 10:57 AM, Blogger Gerald said...

GDP is a very poor measure of economic activity because it is the sum of private and government economic activity. In other words, it is quite easy to game the number by pumping up government expenditures to make the situation far better than it is. I would love to see something I call a Net Domestic Product; Private Domestic Product minus Government Domestic Product. This is based on the concept that the government can provide nothing unless it takes it from someone else. If the NDP is minus, we are in big trouble.

 
At 10/29/2010 11:06 AM, Blogger morganovich said...

gerald-

given that the agencies that report economic performance are part of the government, i doubt they will be in a great hurry to provide that for you...

:-)

 
At 10/29/2010 1:45 PM, Blogger morganovich said...

If the quarterly GDP growth were viewed in terms of just quarter-to-quarter change — the way the rest of the world tends to report GDP — that non-annualized quarterly growth rate in final sales would round to 0.1%, which is minimal growth, virtually flat, by most any standards.

this also implies that if the price deflator is even the teensiest bit understated, we saw final sales contract.

the more i look at this number, the less i like it.

 
At 10/29/2010 2:03 PM, Blogger Andy said...

But if you measure these recoveries from the trough, this one had a much larger decline and therefore the recovery is quite a bit below trend

 
At 10/29/2010 2:36 PM, Blogger Buddy R Pacifico said...

The U.S. is going to need much bigger GDP growth #s to overcome the Output Gap.

I agree with other comments above that Private Domestic Growth needs separate #s AND Manufacturing #s need to separate out foreign inputs.

What if the election weakened Obama admistration emulated JFK and became pro-business with risky (politically) new iniatives? Eg. substantial reductions in corp tax rate; separating private growth from gov't growth in statitics; a Value Added Tax. These would be courageous and both the Dems and Pubs could take credit if accomplished next year.

 
At 10/29/2010 2:48 PM, Blogger PeakTrader said...

If this is a strong recovery, why does the economy need another round of quantitative easing?

Gross Domestic Product, 3rd quarter 2010 (advance estimate)

Real final sales of domestic product -- GDP less change in private inventories -- increased 0.6 percent in the third quarter, compared with an increase of 0.9 percent in the second.

 
At 10/29/2010 3:04 PM, Blogger PeakTrader said...

Quarterly Real Final Sales (Annualized Growth Rate)

Q2 '09 0.2%
Q3 '09 0.4%
Q4 '09 2.1%

Q1 '10 1.1%
Q2 '10 0.9%
Q3 '10 0.6%

 
At 10/29/2010 3:40 PM, Blogger Jeff Springer said...

What about the recovery starting in 1982 with Reagan's tax cut: no less then 7% growth for something like 5 straight quarters?

 
At 10/29/2010 4:54 PM, Blogger PeakTrader said...

U.S. Economic Growth: Mediocre and Even Closer to Stall Speed
Nouriel Roubini
10/29/2010

Contrary to what the headline figure might suggest, today’s U.S. GDP report reaffirms all the concerns that we have been expressing for a while about extremely anemic growth close to stall speed.

Inventories contributed to 1.4% of the 2% headline growth, while final sales growth—the real driver of medium-term growth once the inventory noise is out—worsened, growing an abysmal 0.6%.

 
At 10/29/2010 5:13 PM, Blogger Hydra said...

This is based on the concept that the government can provide nothing unless it takes it from someone else.

==============================

Except government has enormous economy of scale. As a result it can do things individuals and businesses cannot do for themselves, let alone for anyone else.

Whether we believe the analyses or not, many government regulations are passed explicitly on the basis that their benefits are greater than their cost. Or, as GAO says, there is no reason to pass any regulation that does not provide a net public benefit.

Then, even if that is true, the next question is whether the winners can (or do) pay back the losers such that no one is worse off.

 
At 10/29/2010 5:32 PM, Blogger PeakTrader said...

Hydra, you're confusing economies of scale with a monopsony.

Government is inherently inefficient. So, the costs are typically understated.

 
At 10/29/2010 6:31 PM, Blogger bix1951 said...

I think optimists must have more fun.
Instead of just looking at the decline and the trough and the recovery it might also make sense to look at the expansion that preceded the recession.
I would argue that a particularly deep trough is caused by a particularly overheated economy.
And we had become so accustomed to the heat that nobody understood it.
The overheating may go as far back as Nixon taking us off of gold....

 
At 10/30/2010 9:34 AM, Blogger Hydra said...

I agree the costs are understated. The government creates external costs same as business and even personal activities. We should have more accurate measures of what these are as a means of protecting our property rights.

However, we must be EQUALLY diligent about accurately determining the benefits lest the cost complainers have us cut costs that are real bargains.

Sure government is inefficient, but PE is not perfect either. And despite corruption that occurs government labors under a different set of standards.

My argument is that we should be seeking lowest total cost where to little cost equals production cost plus external costs plus government costs. External cost includes a government inefficiency so I have not ignored it.

 
At 10/30/2010 9:46 AM, Blogger Hydra said...

Bix is right. Complaining about not having a full v shaped recovery implies that we should expect to go back to the prerecession bubble conditions. Optimists are happier because they waste less energy complaining. They focus on opportunity rather than fear or risk. Not that they ignore it, only that they wont spend more than it is worth to avoid the inevitable.

 
At 10/30/2010 9:55 AM, Blogger juandos said...

"My argument is that we should be seeking lowest total cost where to little cost equals production cost plus external costs plus government costs"...

Interesting point...

Well it seems to me that the only way to get to the 'lowest cost' is to elimanate government intrusion, especially when it comes to federal government...

 
At 10/30/2010 11:15 AM, Blogger Ron H. said...

"Well it seems to me that the only way to get to the 'lowest cost' is to elimanate government intrusion, especially when it comes to federal government..."

Well, you may be on to something here, juandos, it seems 'Brutus' had reason to worry. Too bad a little more clarification wasn't provided for the Commerce and General Welfare clauses.

 
At 10/30/2010 6:22 PM, Blogger marmico said...

the more i look at this number, the less i like it.

And rightfully so.

Real Final Sales 5 Quarters after Recession End.

There will be a major payback on change in private inventory in Q4.

 
At 10/31/2010 9:31 AM, Blogger juandos said...

"Too bad a little more clarification wasn't provided for the Commerce and General Welfare clauses"...

Good point Ron H considering just how often those clauses are abused by activists on the judicial benches around the country...

I wonder what Brutus would think of Megan McArdle's idea :Why We Should Eliminate the Corporate Income Tax...

Would Brutus have been shocked at the idea of a corporate income tax?

 
At 10/31/2010 12:09 PM, Blogger Ron H. said...

Thanks for the interesting article, juandos, corporate income taxes are a cruel political joke on people who don't know any better. Most taxes and exemptions are the results of lobbying by businesses to favor themselves and hurt their competitors. As Megan says:

"You can't tax a corporation; you can only tax a person."

You asked:

"Would Brutus have been shocked at the idea of a corporate income tax?"

I don't know about shocked, but our founders, who were smart people, would likely have laughed at such a silly idea.

 

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