Courtesy of Mish.
Mainstream media headlines in the last two days offer an amusing look at GDP forecasts.
GDP Stronger Than Expected
Yesterday, the Financial Times reported US Rebound Stronger than First Thought.
The US economy’s second quarter bounce was stronger than previously thought, with the official annualised growth estimate increased from 4 per cent to 4.2 per cent.
The revision is more evidence of robust underlying growth in the world’s biggest economy as it swung back from a weather affected 2.1 per cent fall in the first quarter.
"Economic Pilot in Reverse"
Today, the Wall Street Journal reported U.S. Consumer Spending Declines 0.1% in July.
Consumer spending fell in July and income growth was weak, signs that cautious consumers could restrain economic growth in the second half of the year.
Personal spending, which measures what Americans pay for everything from sneakers to doctor visits, declined a seasonally adjusted 0.1% in July from a month earlier, the Commerce Department said Friday. It was the first time spending fell in a month since January.
Personal income, reflecting income from wages, investment, and government aid, rose 0.2% in July—the smallest monthly increase of the year.
"Looks like the pilot threw the economy's engines into reverse at the start of the third quarter," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ. Forecasts that the economy would grow at a strong 3% clip in the third quarter "look increasingly unrealistic if consumers don't return to the shops and malls."
Economists surveyed by The Wall Street Journal had predicted personal spending would increase 0.1% and incomes would rise 0.3% in July.
Barclays lowered its forecast for third-quarter growth by a half-percentage point to a 2.2% pace. Goldman Sachs economists lowered their estimate to a 3.1% annual rate from a 3.3% pace.
Diving Into the Numbers
Please consider Personal Income and Outlays: July 2014 by the BEA.
Personal income increased $28.6 billion, or 0.2 percent, and disposable personal income (DPI) increased $17.7 billion, or 0.1 percent, in July, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $13.6 billion, or 0.1 percent. In June, personal income increased $67.1 billion, or 0.5 percent, DPI increased $62.9 billion, or 0.5 percent, and PCE increased $50.5 billion, or 0.4 percent, based on revised estimates.
Real PCE Highlights