Friday, April 27, 2012

First Quarter GDP Growth Slows to 2.2 Percent, Dampening Democrat Reelection Prospects

It's downbeat economic news today.

The government's report is here: "National Income and Product Accounts Gross Domestic Product, 1st quarter 2012 (advance estimate)" (via Memeorandum).

And see the New York Times, "U.S. Economic Growth Slows to 2.2% Rate, Report Says," and MarketWatch, "Mediocre GDP report even worse in the details: Commentary: Final sales up less than 2% for 4th quarter in last 5":
WASHINGTON (MarketWatch) — It should not be a surprise to anyone that the U.S. economy continues to struggle. The evidence is all around us, but the hawks on the Federal Reserve are clinging to false hopes.

The economy grew at a 2.2% annual rate in the first quarter of the year, down from a 3% growth rate in the last three months of 2011, the government estimated Friday. Read our full news coverage of the slowdown in U.S. growth.

Growth of 2.2% is mediocre, but it’s worse than that once you peel away a few layers — about a fourth of the growth in gross domestic product was accounted for by a buildup in inventories, and half of it came from the building and selling of motor vehicles.

Strip away the inventory growth, and final sales in the economy increased 1.6%, the fourth quarter in the past five that was below 2%. Although all the headlines report on the GDP numbers, the number to watch is final sales, because that gauges demand for our products, not merely how much we made.

Consumers continue to outperform. Consumer spending rose at a 2.9% annual pace, the best in more than a year. Yet disposable incomes increased just 0.4%, the seventh quarter in a row in which spending growth outpaced income growth.

You don’t need a Ph.D. from MIT — as Fed Chair Ben Bernanke in fact possesses — to know that’s not sustainable.
Plus, from James Pethokoukis, "Weak GDP report clouds Obama’s reelection chances":
With six months to go until Election Day, time just ran out for Team Obama to run any sort of plausible “Morning in America” reelection campaign. And it’s not just that the U.S. economy grew at a subpar 2.2% annual rate in the first quarter, according to the Commerce Department.

It’s that this may be about as good as it gets for the economy this year. Most analysts have been looking for the second quarter to be no better—if not worse—than the first. So we could end up having a first half of the election year with GDP growth near 2% or below. As Citigroup puts it: “… 1Q GDP data should limit remaining optimism that U.S. economic growth will accelerate significantly this year.” And IHS Global Insight says it’s “looking for second-quarter growth to be similar to the first—around 2%”....

Even if growth perks up a bit from here, it seems unlikely that it will be enough to dent the unemployment rate or boost incomes.

President Obama could still win, of course. But given the current economic trajectory, he will be defying historical precedent if he does.

Obama can only win by changing the subject and demonizing the opposition. That's all he's got, and the progressive thugs will be protesting all year against "economic inequality" and the "corporate rich." And of course the professional left will continue to blame Republicans for the economic disaster, like far-left dullard Steve Benen at Maddow's blog, "More underwhelming economic growth" (via Memeorandum).

RELATED: At IBD, "Hiring Pace Halved: Just 120,000 Jobs Added In March."

PREVIOUSLY: "The Obama Campaign's Reelection Death Rattle."