J: On August 30 the BEA surprised all economic forecaster with their "Second Estimate" for real GDP growth in the second quarter of 2017. The consensus was for a tiny upward revision to 2.7 percent at a seasonally adjusted annual rate from 2.6 percent originally reported.
Instead, we were told that growth had risen to 3.0 percent on a quarter-over-quarter basis. As the chart shows, that was the highest growth rate since the 3.2 percent posted in the first quarter of 2015. The bulk of the increase came from real personal consumption expenditures (PCE), which grew at a 3.3 percent pace. That was a healthy rise from the 2.8 percent previously reported on July 28.
Of course, as the next chart shows, the year-over-year increase was only 2.2 percent. This is just a continuation of the very slow growth pace for real GDP that has been the norm since the last recession ended in June 2009.
In an excellent op-ed piece in The Wall Street Journal yesterday, former US Senator and Texas A&M economics professor, Phil Gramm, and Michael Solon of the American Enterprise Institute made the case why it is so important to get the US economy back to a sustainable real GDP growth rate of 3.0 percent. The long-term average from 1929 through 2016 is 3.1 percent a year. With intelligent tax and regulatory reform (L: THAT sounds impossible in the current environment), we can get there again. Nothing else would be better news for the people of the US.
L: Don't look for anything good in the estimates for the current quarter. The Great American Eclipse Day (small since it was just a 1/2-day drop in production that day) and Hurricanes Harvey and Irma (HUGE!) will produce significant negative effects on GDP for this quarter. Eventually all the re-building will push GDP up again, but right now, those negatives are weighing down all the good things happening in the national economy.