The U.S. Department of Commerce released its economic growth estimates for the second quarter of 2011 and they are, well, dismal. And depressing. The economy grew just 1.3 percent from April to June of this year, well below the 2.5 percent necessary to chip away at unemployment. What’s worse, estimates of growth for the first quarter were revised downward to just 0.4 percent.
According to the Bureau of Economic Analysis press release:
The increase in real GDP in the second quarter primarily reflected positive contributions from exports, nonresidential fixed investment, private inventory investment, and federal government spending that were partly offset by a negative contribution from state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.
The acceleration in real GDP in the second quarter primarily reflected a deceleration in imports, an upturn in federal government spending, and an acceleration in nonresidential fixed investment that were partly offset by a sharp deceleration in personal consumption expenditures.
The deceleration of personal consumer spending is particularly troubling for the Obama administration, since the entire stimulus package assumed that consumer spending was the key to reviving the economy. Goosing consumers would lead to long-term growth.
Moreover, a look at GDP growth since Obama took office surely has the president and his advisers worried:
2009 2nd Qtr: -0.7%
2009 3rd Qtr: 1.7%
2009 4th Qtr 3.8%
2010 1st Qtr: 3.9%
2010 2nd Qtr: 3.8%
2010 3rd Qtr: 2.5%
2010 4th Qtr: 2.3%
2011 1st Qtr: 0.4%
2011 2nd Qtr: 1.3%
Most of the growth in 2009 was independent of the government spending stimulus (and likely reflected the benefits of monetary policy and tax cuts). The economy began to sputter out around the time federal spending peaked. The emperor has no clothes.
Without a significant turnaround in the last two quarters of 2011, history suggests President Obama will be severely disciplined at the ballot box in 2012.