Comments on GDP etc.

U.S. GDP up 1.7 percent in second quarter

July 31 (UPI) &#8212 The U.S. Economy grew at an annual rate of 1.7 percent in the second quarter, the Commerce Department said in an advanced estimate Wednesday

The estimate is subject to revision as more data become available.

Just like Q1 was again revised down. Recall Q1 was initially forecast to be up about 3% (‘proving’ the year end tax hike fears were unwarranted). In what was deemed a bounce back from a cliff fear driven Q4, now reported at up only .1%.

The gross domestic product gained at a sharper rate than economists had expected. The consensus forecast called for a gain of 1.4 percent after a downwardly revised 1.1 percent growth in the first three months of the year.
First-quarter growth was reported as 1.8 percent.

Which was a downward revision from 2.5%.

Investments in commercial real estate, exports and a slowdown in government spending cuts contributed positively to the second-quarter estimate.

I wouldn’t count on exports adding much given the current global economy.

An upturn in state and local government spending partly offset an increase in imports, which subtracts from the GDP, the commerce department’s bureau of economic analysis said.

And the likes of Japan aggressively stepping up competition for our consumer $.

Real personal consumption expenditures rose 1.8 percent in the second quarter after increasing 2.3 percent in the first.

Decelerating as tax hikes and sequesters permanently remove that income.

spending on:
— durable goods rose 6.5 percent after a 5.8 percent increase in the first quarter.
— non-durable goods rose 2 percent, a slowdown from a 2.7 percent increase in the first quarter.
— services rose 0.9 percent, a drop from a 1.5 rise in the first quarter.

See charts:
1. Today’s mtg purchase apps release a bit alarming?
2. Personal consumption paying the price of higher taxes and sequesters
3. Core PCE down sharply

And

4. Take a look at year over year household survey employment ahead of Friday’s numbers. In this survey someone holding 2 part time jobs, for example, is ‘one person working’ while in the non farm payroll numbers it would count as ‘two jobs’.

So far the releases fit the narrative. Tax hikes and sequesters remove govt deficit spending that was offsetting ‘Demand leakages’. For GDP growth to increase, some other agent needs to spend more than his income. If not, output goes unsold leading to cuts in output/employment etc. Note, in line with the narrative, inventory accumulation added about .4% to Q2 GDP in this report.

At the macro level, it’s going to take more deficit spending- either public or private- to sustain growth and employment. And with any growth comes govt deficit reduction via the automatic stabilizers, thus requiring that much more deficit spending from other agents.

Mortgage Purchase Applications


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Personal Consumption


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Core PCE Deflator


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Household Employment Survey YoY


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Asia Chart Alert: The destination of Asian exports – 30 Jul 2013

We need more QE
:(

From Nomura:

Seven countries in emerging Asia – China, Hong Kong, India, Korea, Singapore, Taiwan and Thailand – have released trade data for June, and year-on-year export growth in six of these was negative, the exception being Taiwan. For the “Asian 7” in aggregate, export growth slowed from 7.6% y-o-y in April to 0.3% in May, and to -2.0% in June.

Of the Asian 7 all but India have released exports by destination, so from the remaining Asian 6 we can assess where demand for Asian exports is slackening. Earlier this year, Asian exports held up because weak shipments to Japan and the EU were offset by stronger shipments to the US, emerging Asia itself and the rest of the world.

However, in recent months there has been a broad-based weakening in Asian exports by destination. Even intra-Asian export growth has started to cool, in part due to China’s slowing economy. Much hinges on recoveries in some of the big advanced economies to counter ebbing growth in EM, but this has yet to show up in Asia’s export data.

profits up, sales down

Good for stocks, bad for people theme:

Renault SA, France’s second-biggest carmaker, last week reported unexpected growth in first-half profit as labor-cost cuts and higher vehicle prices more than offset slumping sales. Paris-based Alcatel-Lucent SA today reported second-quarter earnings that topped analysts’ estimates.

GDP report discussion

This is from Bloomberg news.

The question remains, will consumer spending pick up after the initial shock of the tax hikes and sequesters?

Or will growth continue to be low due to the reduced income from those pro active fiscal adjustments?

“The GDP report may also show consumer spending, which accounts for about 70 percent of the economy, grew at a 1.6 percent annualized rate, from April through June, according to the Bloomberg survey median. The prior quarter’s 2.6 percent pace was the strongest since the first three months of 2011.

Payroll Tax
Some of the slowdown in consumption may have been the lingering effect of the payroll tax, which reverted to its 2010 rate of 6.2 percent in January after holding at 4.2 percent for two years, resulting in lower take-home pay.
At the same time, gains in property values and share prices are lifting consumer confidence and helping households keep spending. A July 30 report from the Conference Board, a New York-based research group, will show its sentiment gauge in July was little changed from the five-year high reached in June.

Posted in GDP

Dozens killed in Egypt

Dozens killed as Egypt security forces clash with Morsi supporters in Cairo

By Ayman Mohyeldin, Marian Smith and Elizabeth Chuck

July 26 (NBC) — At least 100 people were killed early Saturday when riot police fired on protesters supporting deposed Egyptian President Mohammed Morsi in Cairo, activists said.

The Anti-Coup Alliance, an umbrella coalition of Morsi supporters, also said at least 5,000 people were injured near the clash in the Nasr City neighborhood of the capital.

More on EU Private Sector Credit Expansion

ECB Says Bank Loans to Private Sector Shrink Most on Record

By Jeff Black

July 25 (BN) — Lending to companies and households in the 17-member euro area fell the most on record in June in a sign the region is still struggling to shake off its longest-ever recession.

Loans to the private sector dropped 1.6 percent from a year earlier, the Frankfurt-based European Central Bank said today. That’s the 14th monthly decline and the biggest since the start of the single currency in 1999.

The rate of growth in M3 money supply, which the ECB uses as an indicator for future inflation, fell to 2.3 percent in June from 2.9 percent in May, according to today’s data. That’s below all 30 estimates in a Bloomberg survey of economists.

M3 grew 2.8 percent in past three months from the same period a year earlier. M3 is the broadest gauge of money supply and includes cash in circulation, some forms of savings and money-market holdings.