Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.4 percent in the second quarter of 2010, (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.
First we plot the GDP per PoP and see that frankly is is declining from Q1 to Q2. This should be the concern not just the slow growth! The annualized growth rate is small but the annualized growth rate per PoP is negative. BEA generally avoids that slight issue.
M2 is showing steady stability for the past few months as shown below. This means that despite the tons of money the FED is printing and sending to banks it is going nowhere.
The M2 slow change is best seen below where we plot annualized and running average growth rates. Note that they are staying at zero.
Now we look at the changes in M2, GDP and Velocity to estimate the inflation independent to the chained numbers. We obtain the following.
The shocking observation is a negative inflation or deflation. This is the first time we have observed deflation to a significant degree. The concern by many economists of a deflationary trend we believe is already evident in the data.
We use the calculated money velocity rather than the assumption of constant. We use the relative percent change in our calculation, a standard practice. The data is shown below:
We now look at the annualized GDP changes by category. Transport and Residential were the two highest relative to percent annualized but Government spending is still a driver. We show these below:
Finally we depict the total changes in total dollars by these sector below which shows the drivers of growth.
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