US 2Q GDP growth at 3.3 per cent? Laughable.
Most economists were expecting the number to come in somewhere around 1.9 per cent. When the data was released yesterday from the Bureau of Economic Analysis, everyone was suddenly scrambling for explanations.
The figure is “simply not credible” writes Yves Smith.
The below chart is from a post by Barry Ritholz at the Big Picture. In blue it shows the inflation measure used in adjusting for real GDP. In red, it shows the CPI (regarded by most as a conservative measure of inflation). As you can see, the two rather strikingly diverge.
In fact, the BEA is marking inflation at 1.2 per cent.
It’s interesting to note the historical points at which the two series diverge, with the CPI much higher. It’s usually on the brink of – or during – recessions. In other words, when good news about the economy is most needed.
Related links
US stocks rally after GDP boost – FT