The first estimate for the output of the economy for the second quarter was released and the news seemed good.
Real GDP rose at an annualized rate of 4.0 percent from a first quarter annualized rate (revised upwards from negative 2.9 percent) of negative 2.1 percent.
The results read well in the headlines.
The strong result reflected, among other things, that the economy was catching up in the second quarter from the bad weather that impacted the first quarter results.
Looking over a little longer time span, real GDP, on a year-over-year basis, was 2.4 percent higher in the second quarter of this year from the second quarter of last year.
In the first quarter, the year-over-year rate of increase was 1.9 percent, revised upwards from 1.5 percent.
The 4.0 percent rate seems good. The 2.4 percent rate seems... not-so-good.
If 2.4 percent captures a "catch-up" from the weather-slowed first quarter, then overall growth is not really that encouraging.
The year-over-year growth rate for the fourth quarter of 2013 was 2.6 percent. The same measure for 2011 and 2012 was 2.0 percent. The fourth quarter over the previous fourth quarter rate of growth for 2010 was 2.8 percent.
The annual rates of growth have also mirrored these year-over-year rates of growth: 2010-2.5 percent, 2011-1.8 percent, 2012-2.8 percent, and 2013-1.9 percent.
The US economy has not grown by as much as 3.0 percent in any year of the current recovery.
The International Monetary Fund, among other organizations, including the US Government, has reduced expectations of future potential economic growth to around 2.0 percent.
There is nothing in the second quarter estimate of real GDP growth that indicates a need for a revision of these revised expectations.
Another measure that parallels the movement in real GDP is the series on Industrial Production. The rates of growth are a little higher than that of real GDP because industrial production only reflects what is going on in the manufacturing sectors of the economy. The general changes in the two measures, however, are in the same direction.
This is shown in the annual data: 2010-5.7 percent, 2011-3.3 percent, 2012-3.8 percent, and 2013-2.9 percent. The two series really mimic one-another.
In the first quarter of 2014, the year-over-year growth rate of industrial production was 3.3 percent. The interesting thing here is that the growth of industrial production in the first quarter did not slacken from the pact of the economy in the fourth quarter, which also was 3.3 percent. The weather did not apparently do much damage to this measure of economic output.
In the second quarter, the year-over-year growth rate of industrial production rose to 4.2 percent, reflecting the pickup in growth picked up by the real GDP numbers.
Still, the industrial production numbers are not exceptional and do not reflect a major spurt in economic growth.
The economy still seems to be expanding, but not in any exceptional way. The rate of expansion is consistent with my belief that there is structural re-structuring going on in the economy and that we should not expect too much from the cyclical response of the economy following the Great Recession.
Note that the continuously compounded rate of growth of the US economy since the end of the recession is only 1.9 percent. And, we have just begun the fifth year of the economic recovery.
It is hard to see too much exuberance coming out of this economy in the next few years. And, add on top of this the uncertainty concerning the future of the monetary policy of the Federal Reserve, the uncertainty of the future of the Obama administration now in its "lame duck" phase, and the uncertainty of the world situation - let alone unknown unknowns - and you can't disagree with all the downward revisions in the potential growth rate of the United States that have just been announced.
There does seem to be some interest in the possibility of future inflation. The new GDP numbers reflect some of this concern. The year-over-year rate of increase in the consumption price index in the new GDP numbers shows that this index rose by 1.9 percent in the second quarter. This is up from 1.5 percent in the first quarter.
The evidence is that this closely watched price indicator is on the rise. Of course, this cheers on those analysts who have been concerned about all the money the Federal Reserve system has pumped into the financial system over the past four years or so.
The 1.9 percent rate of increase is still within the bounds of the 2.0 percent "inflation target" of the Federal Reserve. But, the worry is that it is increasing and that inflation will reach and then "go through" the inflation target and this will give the Federal Reserve another problem to deal with.
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