Tuesday, August 13, 2019

Output Change in the First Half of 2019

The table below is pretty long and ugly. But like a good book, a theme emerges across the many paragraphs and chapters.

The data in the table was pruned from the government source bea.gov that holds mountains of information about the US economy. A regular output of the Bureau of Economic Analysis (BEA) is announcement of the latest number's on national output or what we lovingly call real Gross Domestic Product or real GDP.

While one can find data going back as far as Nancy Pelosi's birthdate, today I pirate mainly very recent information from the first two quarters of this year. The columns identified in the chart by Q1 and Q2 show you that the annualized rate of change of real GDP in the first two quarters of 2019 were 3.1% and 2.1%, respectively.

If you do what I do and read all the crapola that gets written/spoken about such numbers each quarter, you probably shake your head at all the detail and reach for your bottle of Jack and your Perry Como CD. Being an unreformed professor of macroeconomics most of my life, I see my place in the world as being one who can look into all those numbers to find a plot. Of course I'd love to charge you for this valuable service but so far no one has volunteered even a farthing, whatever that is.

So here goes. Let's just focus on the first line of the table. We see that output slowed in Q2 from 3.1% to 2.1%. Hey dudes, at least it was still growing. The AVG 2019 column says that the average growth over those two quarters was 2.6%. The first column AVG 3 YRS says the economy has grown at an average rate of 2.3% over the last three years. I chose 3 years because Nolan is twice that old.

The DIFF column says that the average over the first half of 2019 was a smidge (0.3%) stronger than the average over the last three years. I'm sorry to say this but the BEA spent a ton of money just to tell us that the economy grew a smidge faster in 2019. Incredible. Don't you feel better now?

What else? All those lines below the first one help us to find even more golden nuggets -- or maybe even more of a story. So hold on friends. Maybe there is something here. All those lines below the top line refer to different categories of output. For example, take eight of the rows starting with gross private domestic investment. Those lines report what happened to business spending on such things as plant and equipment and what households were spending on new residences (houses, condos, etc).

I pick out those rows because the AVG DIFF column is very negative in 7 of the 8 parts of investment spending. The only one that was not negative was intellectual property products. The negatives imply that for each of those negative categories, the performance in 2019 was much less than in the three years prior. The -4.6% for business structures reveals that after growing by 1.3% per year in the previous three years, it fell by 3.3% in the first half of 2019. That's a swing of -4.6%.

So while overall real GDP was a yawner in early 2019, we are all wondering what the crappy business investment numbers mean for the future. Will US productivity decline in the future? Will firms cut back even more in the rest of the year? Will this cutback cause a recession? Will Bernie Sanders stop gesturing like a traffic cop in Barcelona? We don't know. But we are watching.

What else? Notice that Personal Consumption Expenditures (PCE) picked up in the second quarter of 2019 but even that 4.3% growth rate was not enough to make 2019 better than the previous three years. The laggard in PCE was the services component. What will happen during the rest of 2019? Will spending on goods slow or will spending on services increase?

Farther down the table is the data related to international trade--exports and imports. Lots of negatives there in the  DIFF column.

Looking at the first half of 2019 reveals as many questions as it suggests answers. Should we be worried that a recession is coming? From these numbers it's hard to know. But clearly the numbers on investment spending and trade require close attention.

AVG 2019 2019 AVG AVG
3 YRS Q1 Q2 2019 DIFF
Gross domestic product (GDP) 2.3 3.1 2.1 2.6 0.3
Personal consumption expenditures 2.8 1.1 4.3 2.7 -0.1
Goods 3.9 1.5 8.3 4.9 1.0
Durable goods 6.4 0.3 12.9 6.6 0.2
Nondurable goods 2.6 2.2 6.0 4.1 1.5
Services 2.3 1.0 2.5 1.75 -0.5
Gross private domestic investment 2.7 6.2 -5.5 0.35 -2.4
Fixed investment 3.6 3.2 -0.8 1.2 -2.4
Nonresidential 3.8 4.4 -0.6 1.9 -1.9
Structures 1.3 4.0 -10.6 -3.3 -4.6
Equipment 3.4 -0.1 0.7 0.3 -3.1
Intellectual property prods 6.3 10.8 4.7 7.75 1.4
Residential 2.8 -1.0 -1.5 -1.3 -4.1
Change in private inventories NA ......... .......... NA NA
Net exports of goods & svcs NA ......... .......... NA NA
Exports 2.2 4.1 -5.2 -0.6 -2.7
Goods 2.9 4.6 -5.0 -0.2 -3.1
Services 0.8 3.3 -5.6 -1.2 -1.9
Imports 3.7 -1.5 0.1 -0.7 -4.4
Goods 3.8 -2.8 0.2 -1.3 -5.1
Services 3.5 4.5 -0.3 2.1 -1.4
Government Cons. And Inv. 1.4 2.9 5.0 3.95 2.6
Federal 1.4 2.2 7.9 5.05 3.7
National defense 1.1 7.7 2.8 5.25 4.1
Nondefense 1.7 -5.4 15.9 5.25 3.5
State and local 1.4 3.3 3.2 3.25 1.9


  1. Professor Davidson: Thank you ** N. I propose that everybody who reads this blog accesses the following site: www.econlib.org It is a library full of economic issues.

    1. Thanks J. Good seeing you. Let's stay in touch. Larry