What is the Real GDP?

What is the Real GDP? How does a good quarter skew our perception?

August 2018

What is the Real GDP?

While the 4.1% GDP growth is spectacular, reality is that the annual rate of growth is still around 3%.  It is unclear how much of the higher one-quarter growth was about one-time factors. AND, IF we look back at the last three years we see that the 2nd quarter was the strongest of the year.  What does this tell us???? Maybe only that a single GDP growth number is a bit wiggy and not a good predictor.

The results were also helped by a massive increase in exports which added 1.1% this quarter and accounted for 27% of total growth. This was largely a result of foreign importers racing to stock pile goods before recent US tariffs went into effect. For example, soybean imports to China soared ahead of the July 6th tariff deadline.

This initial Q2 reading means that average US economic growth in the first half of the year is now 3.1%. If we could sustain that for the full year, then it would be the first full year of 3+% growth since 2003.

Both Apple and Amazon had a blow out quarters for earnings ... meanwhile Facebook and Netflix have struggled. 

"An unusually large number of one-off factors appear to have boosted 2Q GDP, many of which are directly related to escalating trade concerns. As companies and countries race to secure supplies that may become expensive later on, exports have surged and inventories have swelled. If these trends are one-time adjustments (and our economists believe they are), the 'payback' in 2H could be significant. Enjoy the 2Q GDP number, which may be the last best print for a while."


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