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The weaker-than-expected US economy in the first half of the year, by a measure

By on September 29, 2022 0

A key measure of U.S. economic output grew more slowly in the first half of the year than previously thought, according to government data released Thursday.

Gross domestic income, adjusted for inflation, rose at an annual rate of 0.8% in the first quarter of the year and barely rose – at just 0.1% – in the second, the department said on Thursday. Trade. This was significantly weaker than the 1.8% and 1.4% growth rates reported in previous estimates.

Gross domestic product, a better known measure of inflation-adjusted output, fell in both periods, at a rate of 1.6% in the first quarter and 0.6% in the second. These figures were unchanged from previous estimates.

Taken together, the two measures suggest that economic growth was anemic at best in the first half of the year. At worst, the economy had contracted for two straight quarters – a common, albeit unofficial, definition of a recession. An average of the two measures, which some economists consider more reliable than either individual figure, shows output fell slightly in the first half of the year.

The conflicting signals sent by the two output measures in recent quarters had been something of an economic mystery because, in theory, the two indicators should be identical. GDP measures the value of all goods and services produced and sold in the country; the lesser-known gross domestic income measures all the money earned by individuals, businesses, and other organizations. Since one person’s expenses are someone else’s income, the two numbers should add up to the same amount.

In practice, the two measures rarely align perfectly because they come from different data sources. Recently, however, they have diverged sharply, which government statisticians have attributed in part to the large shifts in economic activity caused by the pandemic, as well as the difficulty of accounting for the huge aid programs put in place for the combat. Prior to the latest revisions, government data showed gross domestic income was $773 billion higher than gross domestic product in the second quarter of this year, a gap of almost 4%.

Updated data released Thursday narrowed the gap to 1.3%. Gross domestic income was revised down last year and this year, mainly because workers’ incomes rose less than previously believed. Gross domestic product has been revised upwards in 2020 and 2021, mainly due to higher consumer spending, especially in services, as well as increased exports.

These upward revisions to GDP years mean that the recovery, taken as a whole, looks stronger than previous numbers suggested. They indicate that GDP returned to its pre-pandemic growth path late last year, a remarkably rapid recovery from the deep pandemic recession.

More recently, however, the fastest inflation in decades has taken the breath out of the economy. In the third quarter, which ends on Friday, most forecasters estimate that GDP rose, but only slightly. A forecast model from the Federal Reserve Bank of Atlanta, which has yet to be updated to reflect revised data, estimates GDP grew at just a 0.3% rate in the third quarter. .

The revisions are part of an annual process in which the government incorporates more comprehensive data from the IRS, state unemployment insurance systems and other sources that are not available in time for the department’s quarterly estimates. Trade. The updates affect data going back five years, although changes from previous years have been mostly minimal.