GDP growth, Q2 2007 final

The final estimate for second quarter GDP was a small downward revision versus last month's estimate.  Not many surprises in this rear-view-mirror indicator.   

Here's the monthly chart:

I'm still waiting optimistically for 5%+ real growth rates to kick in, but I may have a longer wait ahead of me if the growing crowd of recession predictors is even directionally correct.  Articles such as the one at this link (by Professor Hamilton) definitely don't lend support to the optimistic view.  Next month's first look at third quarter results will help sort it out. 

Comments

[Mike H]

Steve,

Wouldn't 5%+ growth worry the fed either about inflation or an overheated, unsustainable economy and cause them to apply the breaks? You've pointed out in the past that while the fed is supposed to be trying to stop inflation their historical effect has been to slow down or put to a halt economic booms. Seems like this mentality would have to be changed before we could see sustained growth numbers at that level.

[Bob]

Steve,

5% real GDP with ~2% inflation, I suppose.

Optimism is one thing. Wishful thinking is another.

You want to take a stab at just how we can hit those numbers? On a sustainable basis? With our current political thinking? And the real chances of changing the whole system?

[Kevin]

I'm pretty optimistic, but I don't expect 5% real GDP growth to become typical. What makes you look for that? Kurzweil?

[Steve]

Mike:
Yes, the Fed still apparently thinks growth causes inflation, so that could be a roadblock.

Bob, Kevin:
Hopeful thinking, but not out of the question. The passion for some people is whether the local NFL team will win the super bowl. For others, it's which celebrity will win Dancing with the Stars. For me, it's when Kurzweil's predicted high growth rates will kick in, and whether politicians can be prevented from screwing it up. (Those "science thingys" can be expensive—see http://tinyurl.com/2fprq2 —and expensive things cause bigger deficits, you know.)

[Syphax]

Steve, the article cited is actually by Menzie Chinn and not by James Hamilton. An easy mistake to make considering they are on the same blog, but I think its fair to say that Menzie Chinn is generally more pessimistic and less objective than Hamilton. The post is probably therefore less meaningful.

[Steve]

Syphax:
Thanks, I did miss that one. I'll have to watch the bottom line more carefully at that blog.

[dblwyo]

You might want to take a look at PoliticalCalculations most recent forecasting efforts as well:
http://tinyurl.com/2u29ly which may support you a bit. Though my feeling is that the economy is slowing and was before housing and the credit crunch.
My skepticism is based on a look at YoY changes and trends:
http://tinyurl.com/2zvof7
backed up by a look at changes in GDP components:
http://tinyurl.com/39adyt.

So on this, in the short-run consider me more of a pessimist.