Alternative Visions – Dissecting the US 2nd Quarter 2014 GDP – 08/09/14

Dr. Jack Rasmus takes a detailed look behind the numbers for the advance release last week of the US 2nd Quarter GDP.  Is the economy really growing at a 4% annual rate, after having fallen -2.9% in the first quarter 2014?  How much of the US GDP numbers are due to statistical redefinitions and revisions converging this summer? And how much is due to ‘real’ trends?  Why is the US GDP now becoming so volatile, with big swings quarter to quarter—which nonetheless average out to a subpar historical 1.8% or so growth rate long term?  Dr. Rasmus looks at the main determining categories of US GDP over the past 12 months, in addition to the most recent 2nd quarter 2014. He concludes big swings in business inventories, consumer credit based spending (especially for auto securitized subprime loans) and volatile ups and downs in government spending and net exports lay behind the continuing ‘stop-go’ of the US economy.  Big swings in business inventory investment, in anticipation of consumer spending recovery that proves quickly unsustainable, accounts for much of the GDP volatility over the past year—not the weather.  Explanations why inventory investment, US exports, household durable goods consumption, and local government spending that occurred in the 2nd quarter will not be sustained going forward are offered.