Q2 GDP: The Recession Without A Recession

By Douglas A. McIntyre Updated Apr 28, 3:50AM EDT · Published Jul 31, 8:27AM EDT

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Commerce_department_logo_2 Today’s "OFFICIAL" Gross Domestic Product (GDP), or GNP for those of us old school guys, is somehow managing to hang in there. Today’s official Q2 preliminary GDP from the Commerce Department came in at +1.9% versus estimates of about +2.2%. We did see lower revisions for the prior quarters with Q1-2008 final revisions at +0.9% (from +1.0%) and Q4-2007 revised to -0.2% for the first official drop in this cycle. The good news is that we are still the biggest kid on the block as Q2 Real GDP came in at $11.7006 TRILLION. The bad news is that the positives do not reflect the woes affecting the bulk of the population.

The inflationary component came in with prices up +4.2% for PCE andex-food and ex-energy PCE showed a +2.1% gain. The $140 Billion instimulus checks contributed and if you wanted a good stock jokecomparison you would want to chalk that up as non-GAAP growth that hasto be deducted.

So where are the gains comeing in? Durable goods (big ticket items)were -3%, while non-Durable goods rose by +4% and services rose by+1.1%. The weak dollar is part of the gains here as exports rose bymore than 9% as imports decreased by over 6%. Another big help was theboost in government spending with a gain of +6.7%.

Before going further, it is extremely hard to cover this objectivelyand it isn’t that we don’t believe the numbers. But the components andinflation that were seen in Q2 and in Q1 make the gains here just seemlike a footnote. When you look at corporate earnings falling, jobrates getting worse, food and energy prices rising the way they have,and on and on it’s just hard to participate in the notion that there isno recession.

Whether or not we teeter on the positives or negatives, this is arecession for about 85% of the country. But there is actually goodnews… If we just all dig in and watch excessive spending we mightjust all get through this thing just fine. A lot of the homeownersshould have been renters and the borrowing practices many used over thelast 5-year period were ludicrous. De-leveraging ahead isn’t just forbanks and brokerage firms.

Despite ALL of the problems, this isn’t looking as bad as it could have looked.

Jon C. Ogg
July 31, 2008

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.