by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Economic growth is down, but not out. Expect a rebound in the current quarter. But meanwhile, the era of diminished expectations keeps diminishing even further.
The very morning after Hillary Clinton took the torch from President Barack Obama as the Democratic Party’s presidential candidate, the Bureau of Economic Analysis, part of the president’s own Commerce Department, delivered decidedly downbeat news about the nation’s economic performance on Obama’s watch. Those who believe numbers released from Washington are rigged by the politicians in power should feel hard-pressed to explain how the White House failed at this crucial juncture to flog the BEA into cooking up something better.
The agency reported real gross domestic product in the second quarter rose at an annualized rate of just 1.2%, with the first quarter’s number revised down to 0.8%. The first six months of 2016 therefore saw annualized growth of a mere 1%, making the first half the slowest since 2011.
The Wall Street Journal consensus had expected second-quarter growth to run at 2.6%, and my estimate last week called for (mea culpa) “3% or greater.” But before we decide economic expansion has lost its grip, along with the prognosticators, something else is worth noting: The components of growth in the second quarter are signaling stronger economic gains in the third. …
… All that is required in the current quarter is for consumer spending to perform reasonably well—say, at 3%—while most of the other drags on growth disappear or go mildly positive. We will then see an acceleration to 2% or better. Even in the era of diminished expectations, that may not be too much to expect.
Meanwhile, to look on the bright side, the expansion has now lasted seven full years, a year longer than the previous one. And it almost definitely has further to go. At an average annual rate of 2.1%, it’s also the slowest expansion on record.