Surprise! The Economy Is Even Worse Than You Thought

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Surprise! The Economy Is Even Worse Than You Thought

Post by Riddick » 09-29-2022 11:39 PM

Those who argued the economy was not actually in a recession could point to low unemployment and a measure of the economy known as Gross Domestic Income, which had been reported as growing 1.8 percent in the first quarter and 1.4 percent in the second quarter.

On Thursday, the Commerce Department released revisions to its GDP & GDI estimates. The GDP estimates were unchanged but the GDI estimates for the first half of this year were marked down sharply: First quarter GDI grew at a 0.8% annual rate & second quarter growth was a mere 0.1%.

Many economists look to the average of GDI and GDP as a signal for the health of the economy. Prior to the revisions, that average appeared to imply the economy was growing in the first half of the year, supporting the claim the economy was not in recession. After the revisions, the average indicates the economy shrank 0.3 percent in the second quarter and 0.4 percent in the first.

The government also revised GDP upward for 2020 & 2021, primarily because consumer spending and exports were higher than previously thought. This means the economic weakness brought on by the pandemic was not as bad as originally estimated and the recovery begun under President Donald Trump was stronger.

it also helps explain why the Biden administration’s aid packages helped spark the highest inflation in decades. The economy—especially consumer spending—was already well on the way to a full recovery and the additional stimulus overheated demand.


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