Suitably Flip

Q3 GDP Revised Upward, Q2 GDI Turns Red.

The second look at third quarter GDP growth clocked in just below expectations (and below long-term potential) at 2.7%, but still meaningfully better than the advance estimate of 2.0%.

But economist Justin Wolfers notes that the GDI (gross domestic income) data, which in theory should equal GDP, tells a different, darker tale.

Real gross domestic income (GDI), which measures the output of the economy as the costs incurred and the incomes earned in the production of GDP, increased 1.7 percent in the third quarter, in contrast to a decrease of 0.7 (revised) percent in the second.  For a given quarter, the estimates of GDP and GDI may differ for a variety of reasons, including the incorporation of largely independent source data.  However, over longer time spans, the estimates of GDP and GDI tend to follow similar patterns of change.

That negative print in the second quarter was revised down from the previous estimate of +0.2%.

Wolfers:

For sure, we can now be more confident the US economy slowed (sharply!) in Q2. And we're puzzled why jobs growth was so strong in Q3.

— Justin Wolfers (@justinwolfers) November 29, 2012

Is there a case that the US economy fell into recession in Q2?GDI fell 0.7%;Payrolls growth averaged only +67k;Unemployment was rising.

— Justin Wolfers (@justinwolfers) November 29, 2012

I'm not arguing that the US economy did fall into a (brief) recession in Q2, but it is a real enough possibility that it's worth considering

— Justin Wolfers (@justinwolfers) November 29, 2012

Update:  Ugh.  Even if you focus on the 2.7% GDP number and ignore the 1.7% GDI, the components of that growth are unsettling.  Government spending and invesntory accumulation spiked, while personal consumption (the real growth driver) slowed.

Note these are all pre-Sandy numbers.

 

Comments

Q3 GDP Revised Upward, Q2 GDI Turns Red.

The second look at third quarter GDP growth clocked in just below expectations (and below long-term potential) at 2.7%, but still meaningfully better than the advance estimate of 2.0%.

But economist Justin Wolfers notes that the GDI (gross domestic income) data, which in theory should equal GDP, tells a different, darker tale.

Real gross domestic income (GDI), which measures the output of the economy as the costs incurred and the incomes earned in the production of GDP, increased 1.7 percent in the third quarter, in contrast to a decrease of 0.7 (revised) percent in the second.  For a given quarter, the estimates of GDP and GDI may differ for a variety of reasons, including the incorporation of largely independent source data.  However, over longer time spans, the estimates of GDP and GDI tend to follow similar patterns of change.

That negative print in the second quarter was revised down from the previous estimate of +0.2%.

Wolfers:

For sure, we can now be more confident the US economy slowed (sharply!) in Q2. And we're puzzled why jobs growth was so strong in Q3.

— Justin Wolfers (@justinwolfers) November 29, 2012

Is there a case that the US economy fell into recession in Q2?GDI fell 0.7%;Payrolls growth averaged only +67k;Unemployment was rising.

— Justin Wolfers (@justinwolfers) November 29, 2012

I'm not arguing that the US economy did fall into a (brief) recession in Q2, but it is a real enough possibility that it's worth considering

— Justin Wolfers (@justinwolfers) November 29, 2012

Update:  Ugh.  Even if you focus on the 2.7% GDP number and ignore the 1.7% GDI, the components of that growth are unsettling.  Government spending and invesntory accumulation spiked, while personal consumption (the real growth driver) slowed.

Note these are all pre-Sandy numbers.