Q3 Adv GDP Data Continues Below Potential Trend

With Q3 data in the books, 2016 is shaping up to be just like the rest of the Obama years; ho-hum. Below potential GDP growth has been the story since the great recession. For 2016 quarterly GDP growth has averaged .36%, which on an annualized basis only gets us 1.5% growth for the year. Is that bad? It’s not good.

It may be the new normal. Well, the new normal until policy makers in Washington, DC and state houses across the country change course.

It is interesting to note the change in reporting methodology for GDP that has taken hold over the past few years, and more obviously in 2016. The change has been subtle in that headline GDP quarterly data is released on an annualized basis. It makes for a better visual. 2.95 is a far more attractive number than .7%. The annualized number was always available, and/or easily calculated; though today it takes a more prominent role in the data release from the BEA.

Until policy makers reduce immigration, pass a balanced budget and begin to pay down debt, reduce America’s trade deficit through trade negotiations, strip away regulations crimping the private sector led by Obamacare and Dodd-Frank, and remove the federal government from public education the U.S. economy will continue to under perform. Annualized Q3 GDP data was a small but positive sign for the economy. The economy has appeared to have been moving towards recession over the past several months now, however recent indicators, including Q3 GDP, suggest that trend may have stalled.

Even so, to reach a 2016 GDP potential growth rate of 3%, Q4 GDP will have to be well over 1%, or 4% on an annualized basis. That isn’t likely.

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