Last year, the usual rebound in GDP was flipped. Q1’s are, or were before “residual seasonality”, the low mark followed by some surge at some point. In 2015, it was Q2 that originally jumped, hitting almost 4% in the original estimates. What followed in Q3 was frustration, as GDP was first figured to be only 1.5%. It was disappointing but only to those who thought there was any real difference between 1.5% and 4%. In reality, there wasn’t because the two quarters together were a continuation of the same insufficiency as far as the economy is concerned.
The statistic of GDP is itself misleading, especially since it is overly common to focus on just one quarter at a time, and then just the headline. As I wrote almost exactly a year ago:
That starts with, in my analysis, the great likelihood that the lumpy surge of the past two years (Q2 this year; Q2 & Q3 last year) are going to find the same disappearance as the unevenness originally presented about 2012 and 2013. The instability more than suggests now as it did then, only the BEA refused to acknowledge that until forced by “unexpected” benchmark revelations. That is the pertinent element of GDP as far as predicting, as much as it might, the future course of the US economy.
In truth, we don’t need to go that far in order to understand the current and immediate predicament. With all its imperfections, GDP delivers the unwelcome news in its past performance for anyone wishing to see it. The fact that so many dwell only in the current number has allowed this deficiency to protect and bolster the monetarist case that has so stunningly bombed.
That is to a large extent what happened for 2015, as the current benchmarks removed the lumpiness and left little doubt as to overall, persistent weakness. The “good” quarters always turn out to be the anomalies no matter how many times economists claimed (some still do) it was the “bad” ones that were/are. Some of that is due to how GDP is constructed in its very narrow view; the current estimate being another good example.
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