Friday’s Gross Domestic Product (GDP) Report was terrible in almost every way, shape, and form. You could just see Barack Obama’s face turn sour as the numbers hit the wires as his re-election chances got a bit bleaker. Let’s dig into the report and see what number was even more important than the headline figure.
Looking Back In Anger
The economy grew 1.3% in the second quarter, falling shy of the 1.8% estimate, but the real killer was the revision to first-quarter GDP. Our economy only grew 0.4% in the first quarter, down from the 1.9% that was earlier reported. This lower revision is what opened eyes even more so than the missed headline number for the second quarter.
It shows that the economy lost significant momentum and will be that much harder to gather steam going into the last half of the year. Look for a lot of downgrades to second-half growth estimates, and possibly some lower estimate revisions by equity analysts.
I am afraid that economists and analysts are way too optimistic for economic growth and earnings growth for the second half of the year. I recently heard somebody on CNBC say he expects almost 4% growth for the last six months. I am not sure how he is arriving at that number, but I would consider that to be miraculous given all that is going on.
Consumer Woes
I always look closely at how the consumer is doing. Judging by this report, he is not doing too well. Consumer spending grew an annualized 0.1% in the second quarter, which is way down from the 2.1% growth in the previous quarter. I hesitate to even call this growth for obvious reasons. With the consumer responsible for 70% of GDP, I would say this is a worrisome sign.
The drama in Washington is just that: drama. However, this GDP report is crucial and doesn’t paint a healthy picture of the economy. I want to believe those that are more optimistic about the second half, but unless economic data start backing them up, those predictions are just a pipe dream.
Those Revisions Are A Killer is an article from: 
