Q2 GDP—No High-Five For You!

It’s been obvious as hell for a long time that CNN is completely in the tank for the Democratic National Committee (DNC). But this AM they outdid themselves—rolling out some nincompoop economic weather-girl to claim that the Q2 GDP gain of 2.8% was”incredible” and a “high-five” for the Biden-Harris economy.

Then again, $71 billion or 44% of the allegedly awesome $260 billion increase in Q2 real GDP consisted of a  large inventory stocking gain. Real GDP excluding the inventory swing rose by only $89 billion or a pretty limpid 1.6% at an annualized rate.

So it needs be recalled that the Commerce Department’s estimate of inventory gains and losses is one of the flakier components of the GDP in terms of its impact on the annualized headline number during any given quarter—yet its economic significance over any reasonable period of time is diminutive at best. That is to say, the impact of the inventory change figure on the headline number for quarterly GDP can be a big positive, a big negative, a nothing burger or anything in-between. Its impact on the longer-term rate of GDP growth, however, doesn’t amount to a hill of beans.

Thus, during the past four years the inventory stocking/destocking figure has varied from -$274 billion or -1.4% of GDP in Q2 2020 (the Lockdown quarter) to +$207 billion or +1% of GDP in Q4 2021. However, over the 18 quarters since Q1 2020, the inventory change figure has averaged just +$40 billion per quarter or barely 0.2% of GDP.

So the better part of wisdom is to forget the inventory-whipsawed annualized rate of change in quarterly real GDP and focus instead on the “real final sales of domestic product” series, which deletes inventory change but encompasses everything else.

In that context here is the annualized rate of change for real final sales of domestic product for every quarter since Q1 1960. We would happily provide a magnifying glass to CNN’s economic weather-girl to examine this data because there is nothing awesome or even average about the final bar on the right-hand side of the chart.  It ranks in the bottom one-seventh of all observations posted during the last 258 quarters!

Moreover, the tepid gain for Q2 2024 shown in the graph below is a remainder that the UniParty rule since January 2017 has produced the very worst trend rate of economic growth since WWII. Given that the bipartisan consensus in Washington went all-in for the lockdowns and other so-called pandemic mitigation measures, and the violent GDP whipsaw they generated, it is fair to average that period with the gains during the Trump years before February 2020 and the results in Joe Biden’s economy after the pandemic measure were largely abandoned.