GDP Revisions show Less Improvement

By Kenneth Hunter

NOTE: The following represents the analysis-based opinion of the author and do not reflect those of his employer or any other affiliations.

On July 29th, the Bureau of Economic Analysis (BEA) released its initial report on Gross Domestic Product (GDP) for the 2nd Quarter of 2011. Their findings showed that Real GDP (chained to factor inflation) increased at an annual rate of 1.3% during the second quarter, performance that was below expectations. Their findings also showed that Real GDP in the first quarter, earlier reported at more than 2% (annualized), was downgraded to 0.4%.

More significantly, the BEA revised its GDP data to match revisions to the national income and product accounts. These adjustments significantly altered Real GDP measurements from 2003 to the first quarter of 2011. As a result, the current measurement of Real GDP for the second quarter (annualized) of $13.23 Trillion is less than Real GDP in the second quarter 2008 ($13.31 Trillion), the last quarter prior to the economic collapse that exacerbated the recession that began in 2007 (see graph below).

The revision also shows that the impact of the recession was a 5.1% decline in GDP between the official start of the recession (second quarter, 2007), and its deepest point of decline (second quarter, 2009). Earlier reports showed an impact of about 4.1% decline.

Earlier this year, the BEA reported that Real GDP for the fourth quarter 2010 finally exceeded the level set in the second quarter of 2008.  While it is unlikely that this revision will change the formal timeframe for our most recent recession (2007-2009), it does better represent the realities still facing the economy and American people as they proceed with recovery.


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