The Real GDP Is Down 0.6% And Most Sectors Of The Economy Had Declines - AIER

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Revised Real GDP Posts Smaller Decline, Real Private Domestic Demand Increases
Robert Hughes – August 25, 2022 CC BY 4.0

(NOTE: CHARTS ARE IN THE ORIGINAL ARTICLE LINKED BELOW)

Revised data show real gross domestic product fell at a 0.6 percent annualized rate in the second quarter versus a 1.6 percent rate of decline in the first quarter (see first chart). The advance estimate had shown a 0.9 percent decline. Over the past four quarters, real gross domestic product is up 1.7 percent.

Real final sales to private domestic purchasers, a key measure of private domestic demand, have shown greater resilience. Revised estimates show it rose 0.2 percent in the second quarter following a 3.0 percent pace of increase in the first quarter (see first chart). Over the last four quarters, real final sales to private domestic purchasers are up 1.8 percent.

Declines were widespread in the second quarter. Among the components, real consumer spending overall rose at a 1.5 percent annualized rate versus a 1.0 percent gain in the advance estimate, and down from a 1.8 percent pace in the first quarter. That is the slowest pace since the lockdown recession. Real consumer spending contributed a total of 0.99 percentage points to real GDP growth. Consumer services led the growth in overall consumer spending, posting a 3.6 percent annualized rate, adding 1.56 percentage points to total growth. Durable-goods spending fell at a 0.1 percent pace, subtracting 0.01 percentage points while nondurable-goods spending fell at a -3.7 percent pace, subtracting 0.56 percentage points (see second and third charts). Within consumer services, growth was broadly strong, led by food services and accommodation (12.4 percent), recreation (6.8 percent), and other services (5.5 percent growth rate).

Business fixed investment was unchanged in the second quarter of 2022 after a 10.0 jump in the first quarter. Intellectual-property investment rose at a 10.0 percent pace, adding 0.51 points to growth while business equipment investment fell at a -2.7 percent pace, subtracting 0.15 percentage points, and spending on business structures fell at a 13.2 percent rate, the fifth decline in a row, and subtracting 0.36 percentage points from final growth.

Residential investment, or housing, fell at a 16.2 percent annual rate in the second quarter compared to a 0.4 annualized gain in the prior quarter. The drop in the second quarter subtracted 0.83 percentage points (see second and third charts).

Businesses added to inventory at an $83.9 billion annual rate (in real terms) in the second quarter versus accumulation at a $188.5 billion rate in the second quarter. The slower accumulation reduced second-quarter growth by a very sizable 1.83 percentage points (see third chart). The inventory accumulation helped boost the real nonfarm inventory to real final sales of goods and structures ratio to 4.06 from 4.0 in the first quarter; the ratio hit a low of 3.75 in the second quarter of 2021. The latest result is still below the 4.3 average for the 16 years through 2019 but suggests further progress towards a more favorable supply/demand balance (see fourth chart).

Exports rose at a 17.06 percent pace while imports rose at a 2.8 percent rate. Since imports count as a negative in the calculation of gross domestic product, a gain in imports is a negative for GDP growth, subtracting 0.45 percentage points in the second quarter. The rise in exports added 1.88 percentage points. Net trade, as used in the calculation of gross domestic product, contributed 1.42 percentage points to overall growth.

Government spending fell at a 1.8 percent annualized rate in the second quarter compared to a 2.9 percent pace of decline in the first quarter, subtracting 0.32 percentage points from growth.

Consumer price measures showed another rise in the second quarter. The personal-consumption price index rose at a 7.1 percent annualized rate, matching the first quarter. From a year ago, the index is up 6.5 percent. However, excluding the volatile food and energy categories, the core PCE (personal consumption expenditures) index rose at a 4.4 percent pace versus a 5.2 percent increase in the first quarter and is the slowest pace of rise since the first quarter of 2021 (see fifth chart). From a year ago, the core PCE index is up 4.8 percent.

Lingering materials shortages, labor constraints, and logistical problems are sustaining upward pressure on prices, though progress is being made on improving the supply-demand balance. Upward price pressures have resulted in an intensifying Fed policy tightening cycle, raising the risk of a policy mistake. In addition, fallout from the Russian invasion of Ukraine continues to impact global supply chains. The economic outlook remains highly uncertain. Caution is warranted.

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Shila
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If America didn’t put so many trade sanctions on Mexico, Canada and China, we could have avoided this slump.

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Trump probably made about $110 million selling top secrets.
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Or maybe if we didn't decide to stop investing in oil and gas and if we didn't decide to increase taxes and shut down the economy for 2 years and give trillions of dollars to billionaires while taxing the upper middle class and middle class more, then maybe we could have avoided this slump.

Also, FWIW, Trump was the person who instituted NAFTA, which strengthened trade agreements with Mexico and got us energy independent.

Also, it was BIDEN, not Trump, who disrupted America's progress on oil.

But I shouldn't even bother trying because I can literally hand over the NAFTA agreement paperwork but some journalist over at WaPo can just misconstrue it and that is all you'll probably believe. 
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But I'll try anyways:

The number of oil rigs in the U.S. plummeted on January of 2020, following when we shut down the whole economy for COVID lockdowns. [1]

Even currently, we are now just getting back to what they were at in January of 2020. 

So Trump screwed this one up by shutting down the whole economy, but as we can see from the data, Biden did absolutely nothing to unscrew us when he came back, since the rig counts are moving at the same pace as when they were reopening when Trump left.

So, as far as gas is concerned, Biden has failed. Though it remains to be seen what will happen with the new permits the BLM issued. Hopefully they will actually become oil drilling centers.

Now, as for saying Trump screwed up with the USMCA vs. NAFTA.

Here is a summary of the differences between NAFTA and the USMCA agreement from the International Trade Administration:

According to them:

All products that have zero tariffs under NAFTA will remain at zero under USMCA. 
Canada will provide new and expanded access (via Tariff Rate Quotas) for U.S. exports of several dairy categories, including:
  • Milk
  • Cheese
  • Cream
  • Skim milk powder
  • Condensed milk
  • Yogurt
Canada will also eliminate its tariffs on whey and margarine. [2]
So, no. We did not "put so many trade sanctions on Mexico." In fact, we even alleviated some we had from Canada, which makes our produced is more competitive over there, thus strengthening our economy.

But even for cars, which the liberal media said Trump completely screwed up with the USMCA, here is what the same source states:

NAFTA’s automotive rules of origin are outdated, permit ‘free riding’ by countries outside of North America, and have discouraged auto manufacturing and investment in the United States. The USMCA includes upgraded rules of origin for automobiles and automotive parts that promote reshoring of vehicle and parts production and incentivize new investments in the U.S. automotive sector.
  • Increased Regional Value Content (RVC) requirements;
  • New requirements for vehicle producers’ procurement of North American-sourced steel and aluminum;
  • Eliminates loopholes that undermine RVC thresholds;
  • Introduces a first-of-its-kind Labor Value Content (LVC) rule;
  • Reduces the administrative burden on vehicle and parts producers. [3]
So while it was more restrictive on Mexico, it actually incentivized investment into the AMERICAN auto industry and made our cars MORE COMPETITIVE. 

They explain:

The USMCA includes many innovative provisions designed to incentivize new U.S. investments in the automotive sector, to promote additional purchases of U.S.-produced auto parts, to advance U.S. leadership in automotive R&D, to support additional high-paying U.S. jobs in the automotive sector, and to encourage automakers and suppliers to locate future production of electric and autonomous vehicles in the United States. [3]
So, if anything, the USMCA actually strengthened our economy and did not contribute to our current economic slump. The slump would have been significantly worse if we stayed with NAFTA, according to the International Trade Administration.

Granted, I will state that these are government explainer sources and some of the information could be wrong, but you can pore through the rather hefty document yourself which they also make available on their website.

Additionally, the International Trade Association is tasked with creating "prosperity by strengthening the international competitiveness of U.S. industry, promoting trade and investment, and ensuring fair trade and compliance with trade laws and agreements." [4] 

So they are the government department responsible for making sure our trade agreements are being followed, which means it is part of their job to explain these trade agreements properly. Will it be perfect? I am not claiming it is. But what I AM claiming is that their summary carries significantly more weight than some random reporter at a news agency because it is written by the people who will be enforcing it.


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