Filtering Through the Noise

Early last month, the Commerce Department released the latest GDP data. For Q2 of 2010 the GDP growth came in at 2.4%, missing the consensus estimate of 2.5%.

The Commerce Department also released its latest revisions to 2007-2009 GDP data. As I had predicted, the economy shrank more than the previous estimate of 2.6% versus the 2.4% data recorded last year. That made it the largest drop in GDP since 1946.

Moreover, the revisions in August indicated 0% economic growth for all of 2008 versus the previous estimate of 0.4%.

Finally, in 2007 the economy grew by only 1.9% versus the previous 2.1% figure. Overall, since the recession began in December 2007 through June of 2010, GDP has declined by 4.1% according to the latest revisions by the Commerce Department.

Fast-forward to a month later. On August 27, the Commerce Department revised the Q2 2010 GDP data downward. From April to June (Q2) the GDP was revised down to 1.6%, from the initial 2.4% estimate. This latest data has strengthened the growing consensus that the “recovery” is weakening.

I have continued to insist that the initial GDP data would be revised down significantly. This is precisely what we are now seeing. By now, you should understand that there is no recovery in progress. The recession is alive and well, now entering its 34^th month.  This is a fact which no one who is familiar with the economic environment can legitimately refute. Let me be crystal clear.