US GDP contracts at a rate of 2.9%

Not exactly news but still quite incredible all the same:

The Commerce Department said on Wednesday gross domestic product fell at a 2.9 percent annual rate, the economy’s worst performance in five years, instead of the 1.0 percent pace it had reported last month.

I especially like the bit about the worst in five years. It has now contracted during a supposed recovery at the same rate as it did at the height of the GFC. And for those few remaining fans of a demand stimulus, let me just add this:

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 1.0 percent rate.

Usual Keynesian ignorance about the two-thirds of economic activity. But however much it contributes, the economy went backwards even though consumption grew.

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51 Responses to US GDP contracts at a rate of 2.9%

  1. Georg Thomas

    Be this as it may, Steven Kates is an important player in a project to change the way we look at the economy.
    Make sure to read Prof. Hanke’s piece here.

  2. Mk50 of Brisbane, Henchman to the VRWC

    How does GFC to present compare to the similar period from 1929?

  3. Joe Goodacre

    This is big news – surely the Democrats can’t survive Benghazi, Syria, Ukraine, Iraq, carbon pricing (when polls show people don’t care about it) + a recession.

  4. Bruce of Newcastle

    Apparently the fall in GDP was due to a very cold winter caused by global warming. I kid you not.

    I’d look in the direction of Obamacare scaring the pants off of everyone myself.

  5. Joe Goodacre

    Good morning to you too Ari

  6. Aristogeiton

    Fuck off dumbass.

  7. Rabz

    gross domestic product fell at a 2.9 percent annual rate, the economy’s worst performance in five years

    So, everything is proceeding to plan.

  8. Ant

    Indeed, Rabz.

    Obama wants “fundamental transformation”, so turning the US economy into a house of cards makes that objective all the more easier.

  9. AP

    +1 for Obamacare as the prime suspect. Although uncertainty about rising energy costs must also factor in.

  10. Infidel Tiger

    You know it’s getting to the stage that he would have caused less damage if he was a gay Muslim Marxist.

    There’s a lot of ruin in a community organiser.

  11. Token

    I especially like the bit about the worst in five years. It has now contracted during a supposed recovery at the same rate as it did at the height of the GFC.

    Watch & wait for the Krug and other lefty frightbats to say there were right when they demanded MORE Keynesian stimulous. It is the Republican party & Tea Baggers fault for stopping the shovelling of money to shovel ready programs D’Rat party donors

  12. Token

    This is big news – surely the Democrats can’t survive Benghazi, Syria, Ukraine, Iraq, carbon pricing (when polls show people don’t care about it) + a recession

    They are too busy being distraced by stories about a New Jersey bridge, a lost Malaysian aircraft, and a NAACP awarded D’Rat donor who is a disgraceful racist.

  13. .

    Tulips

    Come here you little shit.

    Rub your nose in this:

    The Commerce Department said on Wednesday gross domestic product fell at a 2.9 percent annual rate, the economy’s worst performance in five years, instead of the 1.0 percent pace it had reported last month.

    Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 1.0 percent rate.

    There is the evidence of your idol Keynes failing beyond the grave and political hacks such as yourself soiling yourself over the prosperity of society.

  14. Mk50 of Brisbane, Henchman to the VRWC

    Tulips?

  15. Is that the US economy I hear stretched to breaking point?

  16. .

    Yes Mk50

    Tulips soiling himself once again, trolling and running interference for theft, the rule of the ALP and Greens, socialism and economic malaise on another thread:

    http://catallaxyfiles.com/2014/06/23/where-has-keynes-gone/comment-page-1/#comment-1358492

    See further down at 12.51. Another beating.

    He got smacked down pretty hard.

    It needs to happen over and over again until the blind & aggressive stupidity, arrogance and ignorance is belted out of him.

  17. Tom

    My theory is that the same three or four trolls keep appearing with new gmail addresses. Hi Shitfer. Hi Monty.

  18. John of Perth

    The simple fact is you can’t grow a successful small/medium size business without a proper healthcare plan and kenyancare is causing too much havoc, uncertainty and cost. This adds a high level of calculated risk, uncertainty, cost and administrative burden, which reduces the current favourable business condition of a low credit environment to expand.

    The central authorities like the EU are trying their hardest to keep their jobs than improve the economy. With interest rates at record lows business confidence outside of large corporations would be very low I imagine with the added problem of a Government using its surveillance powers to squeeze taxes from all businesses and make up more taxes to support their Communistic/Keynesian ideology. Perhaps we should call it “Kenyanomics” or “Obummernistic” policy

    I doubt any unedited data from the government will be released on how bad kenyancare is wreaking business confidence. Its like a larger version of the carbon tax in Australia in how it created so many problems and added costs.

  19. Infidel Tiger

    The simple fact is you can’t grow a successful small/medium size business without a proper healthcare plan and kenyancare is causing too much havoc, uncertainty and cost.

    Yep. It’s functioning as designed.

    Private enterprise is the enemy.

  20. Ant

    Just listen to this incredible segment by The Great One about the Cochran/McDaniel GOP senate primary run-off in Mississippi last Tuesday.

    Leaving aside the ruinous trajectory Obama has the USA on, it sums up his only real ‘opposition’- the establishment cronyist Republicans in DC who care nothing for liberty, limited government or the Costitution and are perfectly comfortable with getting down into sewer and play politics just like the Left.

    I conclude that America is well and truly sunk.

  21. Pedro

    Err, straw man alert.

    First, there was a cold winter and lots of disruption as a result.
    Second, didn’t the taper start either end of Q4 or start of Q1.

    There might just be a bit more to the story than anti-keynsian slogans and gotcha claims.

  22. OldOzzie

    As per this article from ZeroHedge, expect to see a stunning GDP Number in Q2 – there is an election in November

    …we think that Q1 GDP was an aberration, and is not representative of the strengthening underlying trend in US growth.” There is nothing we can add to such brilliant weatherman insight as what Jan Hatzius from Goldman just unleashed on the unwitting muppets (all of whom can’t wait for Goldman’s second above-consensus GDP forecast to pan out… unlike the last time in 2010). In brief: Goldman just boosted their Q2 tracking GDP from 3.8% to 4.0% because Q1 GDP imploded. And scene.

    BOTTOM LINE: Q1 GDP was revised down even more than expected, mainly due to lower-than-expected healthcare spending. The May durable goods report was a bit weaker than expected, although inventories rose more than expected. We increased our Q2 GDP tracking estimate by two-tenths to 4.0%.

    1. Q1 GDP was revised to -2.9% in the third estimate (vs. consensus -1.8%), from -1.0% previously. The downward revision was concentrated in two categories: healthcare spending subtracted 1.2 percentage points (pp) relative to the second estimate, while net exports subtracted 0.6 pp. All other components of GDP combined contributed a further one-tenth to the revision. We had anticipated downward revisions to both healthcare spending and net exports—in particular in light of the weak healthcare numbers in the Q1 Quarterly Services Survey—but the extent of these revisions was larger than we expected. As we noted in yesterday’s US Daily, we think that Q1 GDP was an aberration, and is not representative of the strengthening underlying trend in US growth.

    2. Headline durable goods orders fell 1.0% in May (vs. consensus flat). Within the typically volatile categories, a large decline in defense orders (-31.4%) and a modest decline in non-defense aircraft (-4.0%) pulled down the headline figure. Core capital goods orders rose 0.7% (vs. consensus +0.5%) and core capital goods shipments—used by the Commerce Department to calculate the equipment investment component of the GDP report—rose 0.4% (vs. consensus +1.0%) in May. Growth in durable manufacturing inventories grew 1.0% in May and was revised up two-tenths to 0.3% in April.

    3. We increased our Q2 GDP tracking estimate by two-tenths to 4.0%.”

  23. OldOzzie

    Whilst the Liberal Press – Washington Post – states

    Well, that was pretty ugly.

    It turns out that, at an annual rate, the economy shrank 2.9 percent in the first quarter of 2014, mostly due to weak exports, weak inventories, unexpectedly weak health-care spending and the harsh winter. That’s a full three percentage points lower than the initial estimate of 0.1 percent growth, which makes this the largest revision from start to finish in the 30 years that we’ve been calculating Gross Domestic Product this way. And, as you can see below, that was enough to make this the worst quarter for economic growth since the recovery began in mid-2009.

    But you shouldn’t worry too much. If you dig beneath the headline numbers, the economy, in all likelihood, is still growing at the same slow and steady 2 percent pace that it has been for the whole recovery.

    So why was growth so low? Well, there was a perfect storm of one-off factors — in the case of the polar vortex, literally so — that temporarily knocked the economy so far off its course.

    yet in the same polar vortexCanada

    The Canadian economy had an unexpectedly weak start to 2014, with unusually severe winter weather hampering spending across the board.

    According to Statistics Canada, the gross domestic product grew at an annualized rate of 1.2 per cent in the first quarter. That falls short of analysts’ expectations of 1.8 per cent, and is a significant slowdown from the 2.7 per cent growth seen in the fourth quarter of 2013. It’s also the smallest increase in over a year.”

    Winter cast a chill over nearly ever sector.

    So with the same Polar Vortex Canada grows 1.2%, US drops 2.9%

  24. .

    Pedro
    #1360821, posted on June 26, 2014 at 11:36 am
    Err, straw man alert.

    First, there was a cold winter and lots of disruption as a result.
    Second, didn’t the taper start either end of Q4 or start of Q1.

    There might just be a bit more to the story than anti-keynsian slogans and gotcha claims.

    Err, look at the data. A total catastrophe.

  25. Pedro

    Mark, I’m not sure how a big number changes my point. A lot is going on. I think the Keynsians have been whinging for some years that they are not being listened to and I’m glad to say they are probably correct.

  26. .

    No, they’re not.

    They never can be.

  27. John of Perth

    All analysts factor a degree of seasonal adjustment higher than average to be conservative when they do forecasts. Yes it does have a direct correlation with consumer spending, but not such a big swing in downgrades if the example of Canada provided is used as a general guide.

  28. Pedro

    Mark, I think you missed my point. I think the Keynsians are correct that they are not being listened to and it is a good thing they aren’t.

  29. richard

    Joseph Stiglitz (Columbia University Nobel Prize Economics 2001) was on John Faine’s radio program this morning praising Labor’s Keynes economic stimulus under Kevin Rudd

  30. brc

    Joseph Stiglitz (Columbia University Nobel Prize Economics 2001) was on John Faine’s radio program this morning praising Labor’s Keynes economic stimulus under Kevin Rudd

    Reco is here?

  31. MT Isa Miner

    Infidel Tiger

    #1360625, posted on June 26, 2014 at 8:31 am

    You know it’s getting to the stage that he would have caused less damage if he was a gay Muslim Marxist.

    There’s a lot of ruin in a community organiser.

    It’d be funny but it’s not.

  32. .

    richard
    #1360904, posted on June 26, 2014 at 1:58 pm
    Joseph Stiglitz (Columbia University Nobel Prize Economics 2001) was on John Faine’s radio program this morning praising Labor’s Keynes economic stimulus under Kevin Rudd

    Big deal.

    A list of empirical and theoretical work by Nobel prize winners showing that Keynesian policy is impossible and fails:

    Hayek’s work regarding Keynes:

    Hayek, Friedrich A. 1931. Prices and Production. New York: Augustus M.
    Kelly Publishers. 1967.
    ——. 1936. “Economics and Knowledge.” In Individualism and Economic
    Order. Chicago: University of Chicago Press. 1980.
    ——. 1937. Monetary Nationalism and International Stability. New York:
    Augustus M. Kelley. 1971.
    ——. 1939. “Profits, Interest and Investment.” In Profits, Interest and
    Investment and other Essays on the Theory of Industrial Fluctuations.
    Clifton: Augustus M. Kelley. 1975.
    ——. 1941. The Pure Theory of Capital. London: Routledge and Kegan Paul
    ltd. 1952.
    ——. 1942. “The Ricardo Effect.” In Individualism and economic order.
    Chicago: University of Chicago Press. 1980

    The orthodox academic mainstream has been quantifying that Keynes has been wrong for almost 60 years.

    Some nobel prize winner’s papers on the topic:

    1957 Freidman – Permament income hypothesis
    1962 Mundell – Keynes’ IS/LM model in an open economy doesn’t work as planned
    1968 Friedman – vertical Philips curve, no output premium on credible low inflation policy
    1977 Kydland and Prescott – time inconsistency
    1982 – Kydland and Prescott – quantifying what business cycles are actually consist of

  33. .

    I think you missed my point. I think the Keynsians are correct that they are not being listened to and it is a good thing they aren’t.

    Sorry pedro.

  34. Fisky

    It’s just as well the majority of the electorate hate white males and love free stuff, otherwise this magnificent President would never have been re-elected.

  35. Fisky

    The 2012 election was the first election that wasn’t actually about any real issues, but only things, stuff, goodies, and so on. Great choice, Americans.

  36. JC

    Lol, so Faine dragged out the Stig. When no one else is around there’s always the Stigster.

    He doesn’t understand macro policy in any way.

  37. thefrollickingmole

    Now correct me if im wrong but isn’t the overall heading of “bad result in our recovery” a little misleading?

    A fall of that % nearly any other time would be heralded as one of the bringers of the economic apocalypse not “meh, just a bit bad”…

    Now I don’t wish DOOM on the US economy but seriously, the polar vortex caused a drop in medical spending?
    And lets not forget this is with the US becoming a net energy exporter for the first time in decades. That alone should be a bit of an indicator that there has been a serious setback in the US structurally. It will take wiser heads than mine to square that circle though, traditionally the US’ dependence on overseas energy was seen as a huge obstacle to continued growth.

  38. Art Vandelay

    “So why was growth so low? Well, there was a perfect storm of one-off factors — in the case of the polar vortex, literally so — that temporarily knocked the economy so far off its course.”

    I would have though that the polar vortex would have been a Keynesian’s wet dream. Just think of the boost to growth by that extra spending on snow plows, winter clothing, road salt, road and property repairs (not to mention, broken windows).

  39. Infidel Tiger

    You know how you know the US is fucked? They can’t release their Q1 GDP figures until the end of June.

    Give me a fucking break.

  40. brc

    Trying to tie together bad weather and lower medical spending is like trying to tie together interest rates and banana prices.

  41. Tel

    +1 for Obamacare as the prime suspect.

    Make that +2.

    I was a bit pessimistic about it when they first announced it, but the shear scale of incompetent implementation was astounding. When you put that together with dead veterans piled up, and shredded hard drives, you can imagine it might be a confidence setback.

  42. .

    FMD Coulter is a frothing at the mouth idiot. She is an embarrassment to the conservative cause.

  43. JC

    FMD Coulter is a frothing at the mouth idiot. She is an embarrassment to the conservative cause.

    She’s not a bad looker.

  44. Infidel Tiger

    FMD Coulter is a frothing at the mouth idiot. She is an embarrassment to the conservative cause.

    She’s exactly right.

    As soccer becomes popular a country becomes a toilet.

    Look at Britain. When Britain was a nation that played cricket and rolling cheese wheels to the neighbouring village it was the greatest country on earth. Now look at it.

    Australia is heading the same way.

  45. JC

    FFS. I’ve been railing against soccer here at the Cat for fucking years. Why is Coulter such a revelation.

  46. Gab

    FFS. I’ve been railing against soccer here at the Cat for fucking years. Why is Coulter such a revelation.

    She’s not a bad looker :D

  47. Fisky

    And look at all the busted ass countries around the Mediterranean where soccer is basically a state religion. There is something about soccer that seems to link it to poor hygeine, authoritarian government, and deficit spenidng.

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