1. The second quarter GDP, sans exports, grew at just 0.2% (up from just 0.1% in 1Q 2008), far below the 3.3% headline number. The domestic economy is stagnant. (This is also noted, in various ways, in at least two comments above.)

2. The 3.3% announced GDP significantly diverges from the Gross Domestic Income (GDP), which “advanced just 1.9% at an annual rate last quarter [2Q 2008] after contracting the two previous quarters. … “In a Fed paper released last year, Fed economist Jeremy Nalewaik wrote that ‘real-time GDI has done a substantially better job recognizing the start of the last several recessions than has real-time GDP.’”

3. The gap between the “price deflator” used to calculate real GDP, and the CPI-U, was the largest in 2Q 2008 since 1990. Essentially, baked into the second quarter real GDP estimate is a measure of inflation that is far lower than consumer price inflation (and far, far lower than the various BLS producer price indexes). Although the GDP price deflator is calculated quite differently than the CPI and the various PPIs, that does leave some room for skepticism that the BEA may be understating the effect of inflation in contributing to growth in real GDP.

(Also recall that John Williams calculates current US CPI at between 9% and 13%, using apples-to-apples techniques last used during the Bush I and Carter Administrations, respectively.)

4. The preliminary 2Q 2008 GDP identified that non-financial corporate profits fell by $37.8 billion, but were offset by profits of financial corporations of $24.7 billion. Did the domestic financial sector throw off any profits during 2Q, much less at that level? If so, does that exclude the multi-billion dollar charge-offs at some of the largest commercial and investment banks?

Some sources:

Gross Domestic Income v. GDP:
http://blogs.wsj.com/economics/2008/08/28/dont-turn-off-recession-siren-yet/

The gap between the GDP price deflator and CPI:
http://econompicdata.blogspot.com/2008/08/gap-between-gdp-deflator-and-cpi-widest.html
(the red line in that chart)

Profits of non-financial and financial companies, citing the BEA GDP release:
http://www.pbn.com/stories/34755.html

An excellent discussion of additional issues and perspectives around the 3.3%’ headline GDP for 2Q 2008:
http://economistsview.typepad.com/economistsview/2008/08/gdp-growth-revi.html

John Williams’ “Shadow Government Statistics” of CPI, GDP, and other measures:
http://www.shadowstats.com

(and I don’t make a practice of calling people names, but he is willfully stupid.)

http://tinyurl.com/5qvglu

Matt Dubuque

The 3.3% figure is largely the result of a 13.2% increase in exports, and a diminution in imports.

http://www.npr.org/templates/story/story.php?storyId=94076285

Unbelievable. But isn’t that the new American virtue, “staying the course”… right into the iceberg.

This is the republican line. In 200 channels of cable TV, very few pixels are spilled discussing the problems afflicting Wall Street. The populace does not understand this crisis (I often doubt anyone does). Optimism is serving many interests. Obama is not breaking through on this issue. (BTW I am a republican, so this is not meant as cynical).