U.S. economy grew by a record 7.4 percent from July to September, but the data is complicated

[mahatmakanejeeves]

Source: Washington Post

Economy

U.S. economy grew by a record 7.4 percent from July to September, but the data is complicated

Economists expected GDP to rise in the third quarter, a sharp reversal from the historic and devastating second-quarter plunge of 9 percent.

By Rachel Siegel and Andrew Van Dam
Oct. 29, 2020 at 8:34 a.m. EDT

The U.S. economy grew at a record 7.4 percent between July and September, reflecting a turnaround from earlier in the pandemic — but one that does not fully capture the holes in the recovery ahead of what economists and health officials warn will be a long winter.

Data released Thursday morning by the Bureau of Economic Analysis stood in sharp contrast to the historic and devastating second-quarter plunge of 9 percent. As state shutdown measures eased over the summer and businesses brought people back to work, the economy and consumer spending looked vastly different, and much healthier, than they did between April and June. ... But that doesn’t mean the economy has entirely healed, or that the pace at which the economy recovered in the third quarter will keep up in the final stretch of 2020, especially given a surge in Covid-19 cases and a hazy timeline on whether another stimulus bill may be passed.

When data from the Commerce Department on Thursday reveals how much the economy grew between July and September, it is likely to show the sharpest rise in U.S. history. That figure will also take some explaining. ... “Even if we see a 6.7 percent jump in GDP in the third quarter, we have still only gained three-fifths of what we lost this year,” said Beth Ann Bovino, U.S. chief economist at S&P Global Ratings.

For the economy to recover all that was lost in the previous quarter, third-quarter GDP would have had to surge and hit 10 percent, and even more to make up for smaller first-quarter losses — all far beyond economists’ expectations. Put simply, the economy turned around in the third quarter. But it has not shed the coronavirus crisis altogether, and the ongoing health crisis continues to jeopardize the recovery’s strength.

{snip}

Rachel Siegel
Rachel Siegel is an economics reporter covering the Federal Reserve. She previously covered breaking news for the Post's financial section and local politics for the Post's Metro desk. Before joining the Post in June 2017, Rachel contributed to The Marshall Project and The Dallas Morning News. Follow https://twitter.com/rachsieg

Andrew Van Dam
Andrew Van Dam covers data and economics. He previously worked for the Wall Street Journal, the Boston Globe and the Idaho Press-Tribune. Follow https://twitter.com/andrewvandam

Read more: https://www.washingtonpost.com/business/2020/10/29/third-quarter-gdp-economy/

---

No, the GDP did not go up 33.1 percent in the third quarter.

Okay, let's edit this. Here's my original report:

Title: Real gross domestic product (GDP) increased at an annual rate of 33.1 percent in the third quarter

Link: https://www.bea.gov/news/2020/gross-domestic-product-third-quarter-2020-advance-estimate

Source: BEA, Bureau of Economic Analysis

EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, Thursday, October 29, 2020

BEA 20--53

Gross Domestic Product, Third Quarter 2020 (Advance Estimate)

Real gross domestic product (GDP) increased at an annual rate of 33.1 percent in the third quarter of 2020 (table 1), according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 31.4 percent.

The GDP estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see "Source Data for the Advance Estimate" on page 2). The "second" estimate for the third quarter, based on more complete data, will be released on November 25, 2020.(table 1), according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 31.4 percent.

The GDP estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see "Source Data for the Advance Estimate" on page 2). The "second" estimate for the third quarter, based on more complete data, will be released on November 25, 2020.

{snip}

[FBaggins]

1. Personal consumption up 40.7%

Also annualized of course.

[KPN]

25. THIS on steroids.

They have pulled out every trick in the book, plus some. Can only imagine what other "news" we'll experience in the next 5 days.

Oh yeah, "but the data is complicated" my ass. The only complication is the media going along with all this bullshit. Complicated = Bullshit when it comes to anything in tRump's orbit!

[BumRushDaShow]

2. WaPo's headline

U.S. economy grew by a record 7.4 percent from July to September, but the data is complicated

By Rachel Siegel and Andrew Van Dam
Oct. 29, 2020 at 8:34 a.m. EDT

The U.S. economy grew at a record 7.4 percent between July and September, reflecting a turnaround from earlier in the pandemic — but one that does not fully capture the holes in the recovery ahead of what economists and health officials warn will be a long winter. Data released Thursday morning by the Bureau of Economic Analysis stood in sharp contrast to the historic and devastating second-quarter plunge of 9 percent.

As state shutdown measures eased over the summer and businesses brought people back to work, the economy and consumer spending looked vastly different, and much healthier, than they did between April and June. But that doesn’t mean the economy has entirely healed, or that the pace at which the economy recovered in the third quarter will keep up in the final stretch of 2020, especially given a surge in Covid-19 cases and a hazy timeline on whether another stimulus bill may be passed.

When data from the Commerce Department on Thursday reveals how much the economy grew between July and September, it is likely to show the sharpest rise in U.S. history. That figure will also take some explaining. “Even if we see a 6.7 percent jump in GDP in the third quarter, we have still only gained three-fifths of what we lost this year,” said Beth Ann Bovino, U.S. chief economist at S&P Global Ratings.

For the economy to recover all that was lost in the previous quarter, third-quarter GDP would have had to surge and hit 10 percent, and even more to make up for smaller first-quarter losses — all far beyond economists’ expectations. Put simply, the economy turned around in the third quarter. But it has not shed the coronavirus crisis altogether, and the ongoing health crisis continues to jeopardize the recovery’s strength.

https://www.washingtonpost.com/business/2020/10/29/third-quarter-gdp-economy/

[mahatmakanejeeves]

5. Good morning. Thank you for that. I'm now back on the WaPo subscriber list.

They ran the story at 8:34, so the BEA is still handing out copies of the report ahead of time on the condition that it remain embargoed until 8:30.

[BumRushDaShow]

7. One can imagine the tweets that will be blasted out today

5 days before the election.

[mahatmakanejeeves]

9. Most of which will use a misleading number.

I'm glad the WaPo headline got it right.

It's raining steadily here.

[BumRushDaShow]

11. Several number available to readily distort

in ALL CAPS.

And yes, rain from TS Zeta have funneled up here too! Am up to almost 1/2" so far this morning (do for anywhere between 1" - 4" depending on where people live up here, and then possible snow to finish it up for people north of here in the Poconos and Lehigh Valley area).

[mahatmakanejeeves]

17. And we will be hit over the head with every one of them. NT

[NoMoreRepugs]

3. Agree 1000% with u Mahatma - that number

will have a significant downward revision in late Nov. Is consumer spending getting a boost from government spending directly to them... kind of a double whammy maybe??

[mahatmakanejeeves]

6. Whoa -- I made no prediction about the second estimate. NT

[NoMoreRepugs]

35. My bad - was doing a couple of things and forgot the IMO.

I still stick by the prediction.

[lonely bird]

4. GDP is an almost worthless method of measuring the economic health of the country

[Jspur]

15. Agreed South Sudan has the highest GDP growth rate

in the world. That sounds good up until you realize South Sudan is a third world country. India has 7th largest GDP in the world but I wouldn't considered it the 7th best country to live in in the world. GDP is a very misleading number use to spin garbage.

[bucolic_frolic]

8. All the growth is in funerals and caskets

and embalming fluid. Thanks, Donnie!

[Roc2020]

39. yikes!

[Cryptoad]

10. We need to purge a ,,,,

bunch of bean counters after Jan 20th too. 30 M unemployed and publish crap like this so to please Dear Leader.

[George II]

12. From July to September. In July most of the country was shut down. That's like saying....

....that a car moving at 5 MPH has increased it's speed by 400%, up to 20 MPH!!

All my working life I hated how businesses do their "comparisons". One year we had an all-time record quarter, and then the next month management was whining because business was "down" from the previous quarter.

Let's see how trump spins this over the next few days.

BTW, the stock market is down 1800 points this WEEK!

[FakeNoose]

14. Right - they aren't talking about real growth

... they're talking about the rate of growth, which is next to meaningless for the Q3 period.

Unfortunately most Americans fail to read past the headlines on these types of stories, and the Repuke spin doctors know it.

[mahatmakanejeeves]

16. That's only a 300% increase.

It's going at four times its original speed, so the increase is 300%.

If the car had gone from 5 mph to 25 mph, that would have been a 400% incease.

Sorry.

[George II]

21. Yeah, I know. Back in engineering school different professors had different ways of presenting it..

20 is "400%" of 5, but up by "300%", 25 is 500% of 5, up by 400%.

Then we got to economics and people would confuse "mark up" with "gross margin". Honestly, using gross margin used to bother me, it gave a false impression of increase over cost. Charging $1.00 for something that cost $0.80 is 25% mark up but considered 20% "gross margin".

Either way it's 20 cents.

[mahatmakanejeeves]

22. I think we used "points."

You'd buy something for 60 and sell it for 100. That was a 40-point item. It's been a while.

I apologize for the nitpicking, but I'm working at home.

The people who I used to see every day had a Teams Halloween get together yesterday afternoon after work. It was nice to see them again.

Best wishes.

[George II]

24. I've been retired almost 10 years, had to look up "mark up" vs. "gross margin". No problem....

....I do the same thing when it comes to numbers. Guess that's just the engineer in me. The bottom line is that "increases" can be presented in a number of ways to represent what the presenter wants it to be.

PS - I came across this t-shirt a few months ago!

[Aviation Pro]

13. Only economy nerds read and analyze this stuff

Kitchen economics is a whole 'nuther ballgame.

[progree]

42. I bet EarlG got a good laugh out of that.

EarlG's Pic of the Moment
https://www.democraticunderground.com/1017615753



==#############################################==

I wonder who put this in the Left Column on the home page:

If you see any Trump supporters touting the GDP report today, show them these
https://www.democraticunderground.com/100214384987

[progree]

18. FRED: Real GDP: Q4 2019: $19.254 T, Q3 2020: $18.584 T, down 3.48%

https://fred.stlouisfed.org/series/GDPC1

Billions of Chained 2012 Dollars, Seasonally Adjusted Annual Rate

Real gross domestic product is the inflation adjusted value of the goods and services produced by labor and property located in the United States.For more information see the Guide to the National Income and Product Accounts of the United States (NIPA). For more information, please visit the Bureau of Economic Analysis ( http://www.bea.gov/national/pdf/nipaguid.pdf ).

"Real" means inflation adjusted.

Q4: 2019: 19,253.959, Q3 2020: 18,583.984 Billion $

For some reason, FRED uses dates that are the beginning of the quarter.

2016-10-01 17876.179
2017-01-01 17977.299
2017-04-01 18054.052
2017-07-01 18185.636
2017-10-01 18359.432
2018-01-01 18530.483 (Q1 2018)
2018-04-01 18654.383 (Q2 2018)
2018-07-01 18752.355
2018-10-01 18813.923
2019-01-01 18950.347
2019-04-01 19020.599
2019-07-01 19141.744
2019-10-01 19253.959 (Q4 2019)
2020-01-01 19010.848
2020-04-01 17302.511
2020-07-01 18583.984 (Q3 2020)

So we're back to between Q1 2018 and Q2 2018 levels

[mahatmakanejeeves]

19. CNBC gets it wrong at first but then does some editing.

The time stamp on The Hoarse Whisperer's tweet is 9:14, but it must be a retweet of an earlier CNBC tweet that has since disappeared.

Link to tweet

Link to tweet

[Ford_Prefect]

20. Smells like fiddled numbers conveniently released.

[progree]

23. Not at all unexpected by economists, and the release date has long been scheduled

Each 1st estimate of GDP for the quarter comes out about a month after the end of the quarter, in the last week of the month. So the report on Q3 -- which ended Sept 30 -- was expected in the last week of October. Has been that way for years and years.

MarketWatch's poll of economists had forecast 33.0% increase, vs. 33.1% reported today (annualized numbers)
https://www.marketwatch.com/economy-politics/calendar

Yahoo Finance cites a 32.0% expected.

Edited to add: the big caveat in GDP is that virtually all of the gain likely went to the top few percent since that has been the pattern for decades.

The other caveat is that GDP has little to do with economic well-being and even less to well-being overall (they don't subtract environmental destruction, pollution, or resource depletion)

[mahatmakanejeeves]

27. It looks as if MarketWatch wins the prize.

They're complaining about the headlines over at "that other site" too.

Good morning, and thanks for writing.

[progree]

30. And thanks for the thread and keeping everyone straight that the econ didn't grow 33.1% in Q3

[mahatmakanejeeves]

33. I had that BEA site bookmarked for days. I've made the annualized rate mistake myself,

and I was determined not to do it again.

Thanks.

[mahatmakanejeeves]

26. Here's the full release schedule for all of 2020.

When this release was scheduled, no one had even heard of Coronavirus.

Full Release Schedule for 2020

[sandensea]

31. +1

Beware 'beautiful' numbers.

[yaesu]

28. we were warned about these skewed numbers coming out today by an economist yesterday

tRump will use it as a rally cry even though its financial smoke & mirrors caused by covid & the multiplying percentage .

[mahatmakanejeeves]

29. From the Washington Post's Twitter account:

U.S. economy grew at a record 7.4 percent in the third quarter, a sharp reversal from the historic second-quarter plunge

Link to tweet

[progree]

32. Must see - graphs galore from highplainsdem on GDP report and what it means

It's in "The Left Column" in the home page. Also a word about the jobless claims.

https://www.democraticunderground.com/100214384987

Stealing a couple of items from it just as a sample

Link to tweet

Steven Rattner:

To be clear, today's 33.1% gain in GDP ((ANNUALIZED RATE -Progree)) only recovered 66% of losses over 1H. JPMorgan doesn't expect a return to pre-covid levels before 2022. They are not alone: 66% of economists surveyed have a similar call

If you lost $100 and then got back $65, would you feel well off? That's what today's GDP number means.

CHECKING HIS NUMBERS with FRED (St. Louis Federal Reserve) -

https://fred.stlouisfed.org/series/GDPC1

Billions of Chained 2012 Dollars, Seasonally Adjusted Annual Rate

Real gross domestic product is the inflation adjusted value of the goods and services produced by labor and property located in the United States.For more information see the Guide to the National Income and Product Accounts of the United States (NIPA). For more information, please visit the Bureau of Economic Analysis ( http://www.bea.gov/national/pdf/nipaguid.pdf ).

"Real" means inflation adjusted.

For some reason, FRED uses dates that are the beginning of the quarter.

2019-10-01 19253.959 (Q4 2019)
2020-01-01 19010.848
2020-04-01 17302.511
2020-07-01 18583.984 (Q3 2020)

Normalizing above to where Q4 2019 is "100" (by multiplying everything in the above by 100/19253.959) yields:

2019-10-01 100.00 (Q4 2019)
2020-01-01 98.74
2020-04-01 89.86 (Q2 2020)
2020-07-01 96.52 (Q3 2020)

(Note to myself: No...xls sheet 3 row 19)

So we lost 10.14 points from Q4 2019 to Q2 2020 and gained 6.66 points in Q3, leaving us still down 3.48 points.

And then normalizing the 10.14 points to 100 ProgreePoints (by multiplying everything in the above sentence by 100/10.14) yields:

So we lost 100 ProgreePoints from Q4 2019 to Q2 2020 and gained 65.7 ProgreePoints in Q3, leaving us still down 34.3 ProgreePoints

So he's right

[mahatmakanejeeves]

34. What's wrong with this chart?

Bueller? Bueller?

ECONOMY & JOBS

The Great American Recovery: Third Quarter GDP Blows Past Expectations

October 29, 2020 4 minute read

SHARE:

Council of Economic Advisers

{snip}



{snip}

[progree]

37. And compared to: if the economy had continued to grow, say at a measly 2% rate

Q4 2019: 19253.959 B$ from FRED (my #18)

If it had grown at a measly 2% rate, it'd be about 1.5% higher, or 19543 B$ in Q3 2020 -- a little bit above the 19500 line at the top of your graph. Meaning that in Q3 it recovered about 1/2 of where it "should be" had a measly 2% growth rate happened instead.

[progree]

38. EarlG's graph (Pic of the Moment)

https://www.democraticunderground.com/1017615753

[DallasNE]

36. It Seems That Hospitalizations & Related Activity

Would have given the GDP a sizable boost in both 2nd and 3rd quarters and that a footnote would be in order explaining the degree of impact Covid-19 has had above the normal impact of hospital/doctor/pharmacy activity.

[samsingh]

40. the data is a lie of misclassification.

[PSPS]

41. I had $100 but lost $90, leaving $10. I got $10 back, so I'm up 100%!!1111!! Good times!!111!!!11!