What Everyone Missed in the Revised GDP Data

Quoting from the revised GDP report: “Real gross domestic purchases — purchases by U.S. residents of goods and services wherever produced — increased 4.9 percent in the second quarter, compared with an increase of 3.9 percent in the first.”


Although 4.9 percent is clearly faster than 3.9 percent, every leading newspaper will surely report that the GDP report proves the economy is “losing momentum,” and (absurdly) that slower GDP growth in one quarter is evidence of a double‐​dip recession.


After accounting for slower growth of inventories, “final sales to domestic purchasers” increased 4.4 percent in the second quarter, compared with 1.3 percent in the first quarter. Losing momentum? 


Real disposable personal income also increased 4.4 percent, compared with 1.7 percent in the first quarter. Losing momentum?


Business fixed investment increased 17.6 percent, compared with 7.8% in the first quarter. Losing momentum?


Fiscal or (more likely) monetary “stimulus” only claims to speed up “domestic demand” (spending). It turns out that much of that spending went to imports in the second quarter. But that certainly does not mean, as the demand‐​side fetishists would have you believe, that households and firms were not spending.