Truth Before Dishonor

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Shocker: Second Quarter GDP Revised Downward

Posted by John Hitchcock on 2011/08/26


Okay, that’s not a shocker to anyone who’s actually paying attention. It wasn’t even a shocker to the supposedly expert economists upon which America’s Leftists depend — this time. But, while those “experts” expected a downward revision to 1.1 percent growth, the downward revision came in at an even more anemic 1.0 percent growth. And that after the Q1 GDP was revised downward to a flat-line 0.4 percent growth.

Ed Morrissey notes:

The change mainly came from inventories, which the previous estimate overshot. Real final sales of domestic goods — GDP less inventory adjustments — remained at 1.2%, making it a rare quarter in the last two years where this measure outstripped the topline GDP growth rate. Most of the GDP reports have been amped up by inventory expansions. Another bright spot is a revision in consumer spending, which increased 0.4% rather than the initial 0.1% estimate. However, exports got downgraded to a 3.1% increase from an initial estimate of 6.0%. [emphasis mine]

Common Sense Political Thought‘s radical Leftist commenter, Perry (who runs the laughably named Bridging the Gap blogsite), has made numerous claims that businesses aren’t producing or expanding because they want Barack Obama to lose his re-election bid. In Perry’s mind, businesses hate Obama more than they like their own bottom lines. But let’s continue to examine Perry’s delusion, shall we? According to Perry, Conservatives hate Obama because he’s black and we’re raaaaacists. So we want Obama to fail because we’re raaaaacists. And businesses are refusing to expand and hire because they hate Obama. So, that means all these businesses are raaaaacists. Which of course means the radical Leftist Perry doesn’t even have to engage his brain to think. (Barack Obama is 50 percent Caucasian and less than 50 percent black. My grandson is 50 percent black and less than 50 percent Caucasian.)

Let’s look at the facts, shall we? “Most of the GDP reports have been amped up by inventory expansions.” That means businesses have been producing more product in the US than they have been able to sell for most of the quarters since the recession began. Businesses have laid off large numbers of people but still have been outproducing demand. Despite all the layoffs and closures, businesses cannot sell everything they produce as it is. It would be foolish for businesses to expand in that environment. If a business cannot sell what it produces, the business needs to reduce its production, not expand it.

An overproduction (despite a spate of layoffs) can be acceptable and harmless in the short-run. Once purchases return to levels greater than production, the amassed inventory can be dwindled down to normal size again without the need for overtime or a too-quickly expanded work-force. But the longer a business overproduces demand, the more harm comes to the business. Doubly so in some states, which still levy an inventory tax on all the goods the business has warehoused.

Since most quarterly GDP numbers have been inflated by businesses outpacing demand and building up inventory, and some states levy an inventory tax, it would behoove businesses in those states to go on another spate of layoffs to reduce their tax burden and remain profitable, or at least lose less money. And since most quarterly GDP numbers have been inflated by businesses outpacing demand and building up inventory, the radical Leftist Perry’s claims that businesses are refusing to expand because they hate Obama is a verifiably false conspiracy theory.

Oh, by the way, third quarter GDP prospects appear no better than the first 6 months. It seems over-taxing and over-regulating and budget-busting spending does exactly what Conservatives said it does, and exactly the opposite of what radical Leftists like Perry (and the useless Paul Krugman) claim.

One Response to “Shocker: Second Quarter GDP Revised Downward”

  1. […] the opposite of what radical Leftists like Perry (and the useless Paul Krugman) claim. ________ Cross-Post Filed under Business, Conspiracies, Cult of Personality, Culture and Society, Democratic […]

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