We’ve checked the numbers again, and the U.S. economy is really weak. Somebody will just have to remind consumers.
The Department of Commerce recently reported that real gross domestic product, which measures the output of goods and services produced in the United States, increased at an annual rate of only 1.3 percent in the second quarter of 2012, down from the original estimate of 1.7 percent. A good part of the lower growth rate is a slower-than-previously-estimated rate for investments in homes and office buildings.
The only good news in this report was a slight decline in price pressures. Under the new estimates, U.S. prices increased only 0.7 percent in the second quarter of the year, 0.1 percent lower than previously estimated.
With any “weak” economic report comes more talk of a “double dip” recession. Those concerned with the slow rate of economic growth argue that the government has not done enough to help us.
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Economists like Robert Shiller of Yale and Paul Krugman of Princeton see a still-weak housing market and high unemployment rate as the factors holding back consumer spending and therefore economic growth. But while the overall GDP number in the most recent report was revised to lower the biggest component of GDP, consumer spending is still rising.
GDP is measured by counting up expenditures in four main categories — personal-consumption spending, gross private domestic investment, net exports of goods and services, and government expenditures. In the U.S., personal consumption expenditures account for more than 70 percent of overall GDP, and in the second quarter of 2012 such spending rose 1.5 percent.
In a separate report, the Commerce Department provided a preliminary estimate for consumer spending through the end of August. Despite rising gasoline prices, personal consumption is again 1.5 percent higher than the same time last year.
The only part of GDP currently experiencing a decline is government expenditures. According to the Commerce Department’s GDP report, this sector of the economy declined 0.7 percent in the second quarter. Meanwhile, private investment and net exports rose 0.7 and 5.3 percent, respectively.
It’s hard to argue that the U.S. government should spend more while U.S. households keep spending more.
Further, there is evidence the private sector is picking up the slack. Business spending and exports are rising. While certainly not a perfect indicator, this could mean that business owners and managers see enough sales potential here and around the world to start hiring more workers soon.
Despite the weak economy locally based companies like Micron Technology are making plans for more investment. Even though the company reported a loss for its fiscal year ending Aug. 30, cash flow from operations was more than $2 billion, and the company plans capital expenditures between $1.6 and $1.9 billion over the next 12 months.
News of downward revisions may be dismal, but they don’t mean more government “stimulus” is required.
PETER CRABB: Professor of finance and economics at Northwest Nazarene University in Nampa. firstname.lastname@example.org.