CHART OF THE DAY: The CPI-Adjusted GDP Growth Rate Was Stunningly Low

[girl gone mad]

CHART OF THE DAY: The CPI-Adjusted GDP Growth Rate Was Stunningly Low

The economy grew by 1% in the second quarter, according to inflation-adjusted preliminary data released by the Bureau of Economic Analysis.

But to most Americans it did not feel like growth.

That's because the inflation adjustment used by the BEA is far more conservative than the Bureau of Labor's consumer price index, which is based on prices paid for goods and services -- i.e. the things that consumers notice.

When adjusted for CPI, the economy actually shrunk by a stunning 3.4% in the second quarter, according to http://advisorperspectives.com/dshort/updates/GDP-Deflators.php">Economist Doug Short.




Read more: http://www.businessinsider.com/chart-of-the-day-gdp-statistics-cpi-2011-8#ixzz1WCrVCjMK

[RaleighNCDUer]

1. Welcome to 1937. nt

[Samantha]

2. I have read the current formula excludes 3 of the most costly

items in today's economy: prescription drugs, fuel and food. And now with the presentation of the Chained Index, which also would probably be applied to government workers as well as retired participants on Social Security, it will be even more unrepresentative of a fair COLA computation.

Sam

[golfguru]

5. you are sooooooo right n/m

[westerebus]

3. Recession Part Deux.

Looks like the 07 dip was a 70's replay.

Well here comes the 80's.

Ronald Regan is still president. Who would a thunk it?

[progree]

4. Those quarterly numbers are annualized growth rates, BTW

The official (BEA-inflation-adjusted) GDP grew at an ANNUAL RATE of 1.0% in the 2nd quarter.

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
Quoting from the above link: "Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 1.0 percent in the second quarter of 2011 ... FOOTNOTE.--Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified. "

It did NOT grow 1.0% in the 2nd quarter -- that would be fantastic news if it was true, indicating (if sustained for some more quarters) a good recovery and the dawning of Morning in America and all that. (Instead of a very anemic "recovery" that falls far short of producing enough jobs to keep up with working age population growth) The BEA ALWAYS gives the quarterly numbers as annual growth rates, and likewise that's what the media always reports in my experience. But sometimes, sadly, they leave off the word "RATE".

As for the other number, -3.4%, I suspect it too is an annual rate, in which case this CPI-adjusted GDP declined at an ANNUAL RATE of 3.4% in the 2nd quarter; it did NOT decline 3.4% in the 2nd quarter.

One of my pet peeves is that sometimes some media and talk show hosts are a bit sloppy in reporting economic numbers, confusing a lot of people. I am constantly writing to errant media and talk show hosts when I hear statements like "the economy grew 1% in the 2nd quarter".

[roamer65]

6. Sounds like the beginnings of an inflationary depression.