Free Markets, Free People


GDP growth: How bad is it?

Bad.

Real bad according to J.P. Morgan:

This morning we lowered our tracking of Q2 GDP growth from 1.7% to 1.4%. For some time now we have noted that our Q3 GDP call — which was already below consensus at 2.0% — had risks that were skewed to the downside.

After the latest round of data we have decided to lower our projection for Q3 to 1.5%. The strength in inventories reported this morning suggests that businesses may have got caught offsides when final demand weakened this past spring. That inventory build should weigh on production growth in the third quarter as already-cautious businesses seek to work down stockpiles. Added to this downside, the weakness in June real consumer spending will make the arithmetic for Q3 consumption a little more challenging.

Finally, the decline in gasoline prices — which had been seen as an important support to the economy — has partly reversed itself in recent weeks, thereby lessening the impetus to growth from that source. For 2012 as a whole, we are now looking for growth of around 1.7% on a Q4/Q4 basis, about the same as last year and 0.2%-point below our tracking last week. On a year-ago basis real GDP has been growing at a below-trend pace since early last year. If our forecast is anywhere near correct, that pattern will persist for at least another year, and perhaps even longer.

To reiterate:

Q2 – 1.4% growth.

Q3 – 1.5% growth

Q4 – 1.7% growth

For the year, under 2.0%.

The word “pitiful” doesn’t even begin to connote the severity of this forecast.  And note the bottom line of the JP Morgan forecast: “If our forecast is anywhere near correct, that pattern will persist for at least another year, and perhaps even longer.”

And here we are doing the usual – talking about distractions like Bain Capital.

Amazing.

~McQ

Twitter: @McQandO

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13 Responses to GDP growth: How bad is it?

  • Seems we could use  little Bain capital…or anybody’s capital.  Pres. Paracosm has successfully both REDUCED the wealth of Americans, AND he has CHASED capital out of the country.
    It won’t be back ’til he is gone.

    • Worse than that Rags….what little growth we see is from the government spending component.
      Factor that out and GDP growth is NEGATIVE, and has been for some time now.
      IOW – we’re in a DEPRESSION.

  • So business owners respond to incentives and disincentives in their decision making. Which seems perfectly logical to me, and until recently it would have never occurred to me anyone could think otherwise. Recent comments here have shown there are those who would deny this obvious point.

    • Critical thinkery is clearly not high on their capacities and capabilities list sometimes.

      “Thinkery” – I really need to stop reading the Wizard of Oz to the younguns.

    • And even people who are NOT really very risk-averse are scarred shitless by the Obamabanana Republic.

  • Debt as a percentage of GDP for 2012 is estimated to be -8.5%.  So at this rate it would take over 4 years of growth to pay off 1 year of debt.

  • Didn’t the “good” professor tell us that the US is more like France ?

    France’s proposed tax hikes spark ‘exodus’ of wealthy
    Looming tax hikes by France’s new socialist government have triggered an exodus of the Gallic super-rich to ‘wealth-friendly’ nations like Britain and Switzerland.

    • Interesting how that works that way every time it is tried.
      And they keep trying it.  That proves them insane.

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