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Friday Economic Snapshot: A welcome GDP revision

Metal working using plasma cutter on steel

Photo Credit: jbolles, Flickr

By Tom Kaiser
August 30, 2013
Filed under Features, Top Stories

How about some good news on your Friday? Plug your ears to block out the growing war drums in the media and, instead, focus on some good news on your screen. Investors seem to be warming up to the eventual reality of reduced government market stimulus, small-business owners are planning to spend more, unemployment claims continue to beat expectations and the weather has finally warmed up across much of the U.S. giving us a late, hot taste of summer before we head into September.

Nothing can stop us now (key exceptions: a new war in the Middle East, government shutdown or runaway wildfires)! Let’s take a look.

Gross Domestic Product

After initially coming in at 1.7 percent, Q2 gross domestic product was revised up to 2.5 percent. Since we shouldn’t be hearing about any third-round revisions, this is excellent news, the kind we’ve been waiting for. Investors initially cheered the news, at least temporarily breaking a 10-plus-day decline in the Dow Jones Industrial Average.

According to the Bureau of Economic Analysis, “the upward revision to the percent change in real GDP primarily reflected an upward revision to exports, a downward revision to imports, and an upward revision to private inventory investment that were partly offset by a downward revision to state and local government spending.” A lot of revision going on there…

GDP growth above two percent has been elusive these days, as many predicted 2013 was going to be the year when anemic economic growth finally heated up. That hadn’t quite happened, but that was before the last revision now.

Everything’s different now, but feels much the same. Let’s hope we can maintain this healthy level of growth, which could start to have a major impact on employment as we cruise toward 2014.

Small Business Spending

In a survey by Gallup, small-business owners in America are making plans to spend more money. According to the results, 26 percent of owners are planning to increase their spending, which is up from 20 percent at the end of 2012.

“Still, business owners aren’t yet as optimistic about their capital spending as they were prior to the recession,” read the report. “From 2003 to early 2008, owners were much more likely to say they were planning to increase rather than decrease capital spending. Today they are about equally as likely to say they will decrease it as increase it.”

Gallup threw a wet blanket on that positive news there. Looking at the trend going to 2004, things bottomed in early 2009, stagnated for a while, but have shown positive movement in the second half of 2013 to present.

Economic Confidence

Yet another survey from Gallup, U.S. economic confidence remains mired in negative territory, continuing a slide that began most recently in June of this year when the rating nearly reached positive numbers.

“Americans lower level of confidence since early June could be related to a wide variety of factors, including rising mortgage rates, mixed Bureau of Labor statistics employment news, and more volatile U.S. stock prices in reaction to the Federal Reserve’s decision to taper its bond-buying program,” the survey said.

The report went on to suggest that upcoming federal debt negotiations could further lower confidence, given the impact during the fiscal cliff debates in late 2012. Giddyup.

Takeaway

Possible military intervention in Syria has yet to move the markets significantly, however stocks have been moving down for nearly two full weeks. While there are obviously a lot of uncertainties, any conflict is bound to add uncertainty to an economy that needs anything but. Given the current trajectory of rhetoric, expect increasing instability moving forward.

So where’s the good news? This week it’s all about GDP, and the fact that external factors haven’t sent our economy into the ditch. Officially the trend for 2013, weird weather, political games of chicken and difficulty around the world haven’t put the brakes on America’s economic growth. We’re not going fast, but we haven’t slowed down, either. Given the latest data, we might even be speeding up.

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