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U.S. GDP Revised Lower to Show Negative Growth in First Quarter

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June 21, 2014 Original Publish Date
June 25, 2014 FINAL UPDATE to Q1 GDP from BEA.gov

Despite trillions of dollars in stimulus programs, U.S. economic growth has meandered since 2010. Since late 2013 the economy has been on a downtrend. For a second time this year, the U.S. revised its growth rate to show an annualized growth of negative one percent for the first quarter of 2014. Chart UPDATED June 25, 2014.

Despite trillions of dollars in stimulus programs, U.S. economic growth has meandered since 2010. Since late 2013 the economy has been on a downtrend. For a second time this year, the U.S. revised its growth rate to show an annualized growth of negative one percent for the first quarter of 2014. Chart UPDATED June 25, 2014.

U.S. GDP Revised Lower to Show Negative Growth in First Quarter

original article written by Net Advisor

WASHINGTON DC. While you are probably being distracted by another scandal or foreign policy disaster in the Obama Administration, what has not been well discussed is the U.S. economic growth has officially reversed course. The U.S. revised its first quarter GDP growth rate lower that now shows we have negative growth.

“Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 1.0 percent in the first quarter according to the “second” estimate released by the Bureau of Economic Analysis.”

— Source: U.S. Department of Commerce, Bureau of Economic Analysis (PDF)(Full Report, 19pps, PDF)

The previous first quarter GDP growth rate was estimated at 0.1 percent – just a smidgen of evidence of some growth; now that forecast is inaccurate. If the second quarter (ending June 30, 2014) comes in at negative growth too, this would meet the definition of a technical recession (two consecutive quarters of negative GDP).

The Obama government partially blames state governments for not spending enough money.

“The decrease in real GDP in the first quarter primarily reflected negative contributions from private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment that were partly offset by a positive contribution from personal consumption expenditures. “

— Source: U.S. Department of Commerce, Bureau of Economic Analysis (PDF)(Full Report, 19pps, PDF)

It is possible that the current negative GDP data could be a temporary fluke since we are flirting between positive and negative from zero, it could go either way. The longer term data however is not a fluke.

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June 25, 2014 UPDATE:

The third and final revision to the U.S. Gross Domestic product (GDP) – the lead measure of growth of a country’s economy fell -2.9 percent in the first quarter 2014.

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 2.9 percent in the first quarter of 2014 according to the “third” estimate released by the Bureau of Economic Analysis.”

— Source: U.S. Department of Commerce, Bureau of Economic Analysis (PDF)(highlight added)

This 3rd revision to the U.S. GDP numbers makes this the worst quarterly drop in economic growth in an (officially) “non-recession” quarter in U.S. history.

The BEA wanted to remind us that the economy grew 2.6 percent in the fourth quarter 2013. By that measure the U.S. economy has been in a net down-trend since the late 3rd quarter (ending Sept. 30th) 2013.

[MATH: +2.6% Q4 (2013) growth -2.9% Q1 (2014) decline in growth = negative -.03% net decline in economic growth .]

2014 Recession Predicted in 2012?

A Washington Times report said on October 25, 2012 there was a “very large probability” that the  U.S. economy would crash around March 4, 2014. We’ll, the economy hasn’t “crashed” yet, however the prediction did a pretty good job at forecasting the exact quarter that we had awful GDP numbers.

I have argued that the U.S. economy is still in a fundamental recession since 2007. Trillions of dollars in Federal Reserve money have only propped up the stock market so we don’t hear daily media reports of how the rest of the economy is doing. Government stimulus programs have failed to kick-start the economy.

We can cite reasons to show the U.S. economy still has plenty of signs of recession:

  1. Record low participation rate in the US. labor force.
  2. Record welfare recipients with $3.7 Trillion in welfare spending in the last 5 years.
  3. 1 out of 5 American children and 13 out of 100 adults in the USA living in poverty (Report, p13).
  4. Record number (Over 1 million) school-aged (K-12) children are homeless.

If the U.S. economy was really recovering would we need to spend trillions of dollars in welfare and trillions of more dollars in artificial stimulus programs? One might make the argument, the more the government spends, the worse the economy does.

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Is “Cold Weather” Really Causing the Economy to Fail?

The Obama Administration through its intermediaries have tried to blame a “severe (cold) winter” as the culprit as to why the economy is doing so poorly. The excuse mongers blamed the “weather,” not economic policies for a poor jobs report in 2010 too.

Funny, Canada, Greenland, and Norway have harsh cold winters, but we didn’t see any reports blaming the weather for their economies which are all growing faster than the U.S. economy.

Despite Climate Change proponents who clearly don’t understand economics, there was no data in the U.S. 1st Quarter GDP report to even hint that climate temperatures or weather in general had anything to do with why U.S. GDP fell. Nor was there any evidence to suggest that climate change or weather in general had anything to do with why the U.S. economy has been in free fall since late 2013.

The U.S.-debt-to-GDP grew steadily under President George W. Bush's watch. It began increasing during the 2008-2009 recession. President took office in January 2009, and by February, President Obama said the economy was in recovery. The debt-to-GDP under Obama's watch has soared by about 54% to over 100% putting the economy on a risky path where economic growth cannot keep up anywhere near the nation's debt.

The U.S.-debt-to-GDP grew steadily under President George W. Bush’s watch. It began increasing during the 2008-2009 recession. President Obama took office in January 2009, and by February, President Obama said the economy was in ‘recovery.’ The debt-to-GDP under Obama’s watch has soared by about 54% to over 100% of GDP, putting the economy on a risky path.

How to Help the Economy Grow

What can help an economy is real government reform where we actually and permanently cut annual government spending.

Next, the U.S. can lower taxes and regulations that have been strangling business and consumers. Federal healthcare spending, especially when ObamaCare business mandates take effect in 2015 (unless delayed again), will have severe impact on jobs and costs on consumers, including seniors, and thus consumer spending [More HealthCare Reports].

As regulations are more reasonable for business and less time and money is spent on regulatory compliance, then the business can invest money to make it grow. As regulators strangle business and their employees with higher healthcare costs, consumers will also feel the pinch as those costs are passed down in retail prices.

When taxes are lower, consumers have money to spend, or pay down bills. Clearly, the Obama Administration has not been a good steward of the taxpayer’s checkbook as the chart above shows.

As a business succeeds, means consumer demand is there. With consumer demand, you have consumer spending. With consumer spending you have money going into the economy. As money goes into the economy and business makes a profit brings in tax revenues and jobs. It’s that simple.

Middle-Class Decline?

The broader view of the U.S. economy shows more troubling flags. A recent report by Time said that the U.S.’s middle-class is no longer the world’s richest. More people in the U.S. are also renting and unable to afford the costs (including taxes) of owning a home.

In Denial?

Despite the fact the U.S. economy was previously only on a slowing growth trend, and currently not growing at all, some in the media seem to have this fantasy that the U.S. economy is on solid ground?

“U.S. economy on solid ground despite cooler hiring.”

— Source: Reuters, June 4, 2014

The GDP chart at the top of this page, the government’s own economic data, and the skyrocketing deficit might show a different picture than one shown in Fantasyland.

In June 2013, the world’s largest bond dealer, Pimco said that there was a 60 percent chance that the U.S. could fall into recession again within the next three to five years.

Sex, Drugs and Smuggling: How to Boost Economic Perception

A new report this month stated that the UK, Ireland and Italy whose economies are also bleak are considering changing how they account for their nation’s growth rate (GDP).

These countries plan to make it appear like their economies are growing by adding illegal drug sales, smuggling, and prostitution to their country’s GDP. Not that most people in these nations will benefit from this, but it’s a way to make it look like your country is growing and thus try to attract global investment money.

“The U.K., Ireland and Italy are among the nations now moving to include illicit doings when tallying their gross domestic product, the broadest measure of goods and services across an economy…Italy will include smuggling as well as drugs and prostitution. Both changes will begin later this year.”

Further,

“The U.K.’s Office for National Statistics says it will estimate consumption of six drugs: crack cocaine, powder cocaine, heroin, cannabis, ecstasy and amphetamines. Officials will first calculate the number of drug users based on crime surveys, and then multiply by an estimate of the average amount of drugs consumed per user.”

— Source: The Wall Street Journal published via Yahoo! Finance, June 8, 2014

So instead of working on ways to grow the economy, demented political leaders will embrace crime and now make crime appear to be a benefit for their nation’s economy?

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