GDP rose by +7.4% in Q3 (pretty much exactly as expected), after falling by -9.0% in Q2 and -1.3% in Q1. All told, the economy is -3.5% smaller than it was at the end of 2019.
For context, the economy is roughly as far below its peak as in the darkest days of the last recession
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When the economy rises by +7.4%, some will report this as being at an "annualized rate" of 33.1%.
Lemme be crystal clear: This does not mean that the economy is now one-third bigger. (Lemme explain...)
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Reporting *quarterly* GDP growth at an *annualized* rate answers the question: If the economy also grew at this rate for the next 3 quarters, how much larger would the economy be?
But there's no chance that will happen, so the annualized rate answers a question no-one is asking.
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There will be lots of political chatter about today's GDP number. It's true, Q3 is a record rate of growth. But note Q2 was a record contraction, the likes of which we've never seen before.
Big jump down, big bounce back. What really matters is that we're not all the way back.
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So where are we?
The economy is -3.5% smaller than it was in late 2019. Is that a big hole? Well, that's roughly as large as the hole the economy fell into during the financial crisis, and at the time we thought that a damn big hole.
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Was this an unexpectedly large rebound?
Not really. Go back to the start of the year, and look at the forecasts from then, and most forecasters were expecting the economy to basically stop in Q2, and then largely rebound in Q3.
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Ugh, I broke my own thread. Rest of the GDP thread continues below...
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How informative are today's GDP data?
Not very. The growth from Q3 to Q2 reflects the depth of the Q2 hole as much as it reflects the size of the Q3 recovery.
We already knew Q2 was horrible, and we all know Q3 was better. Tons of indicators have told us this.
Show this thread
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Replying to
How informative are today's GDP data?
Not very. The growth from Q3 to Q2 reflects the depth of the Q2 hole as much as it reflects the size of the Q3 recovery.
We already knew Q2 was horrible, and we all know Q3 was better. Tons of indicators have told us this.
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Watch the market (non-)response to today's GDP numbers, and you'll see what I mean. For all the political chatter, markets haven't responded at all. That's because there's not really much relevant news about the state of the economy in these numbers.
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People have lost their long term memory. Yes GDP grew 33% in 3rd Qtr, but after an epic and historic drop in 2nd Qtr. #TrumpHasNoPlan We are where we were in 2008 #BidenHarris2020
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Yes. With an economy that processes $50 billion daily (give or take) & still makes up 24% of the world's GDP, it is important to grasp the numbers.
Losing 1% of the economy in a given quarter is like losing Portugal or New Zealand. Being down 3.5% is like misplacing Switzerland.
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5 days and it’s over! Ignore all the polls! Vote in person or drop off. No mailing ballots. VOTE BLUE!! VOTE BIDEN!! VOTE!!
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We call those craters in fact Trump Cratered the economy by letting the Fed pour trillions into the stock market that the richest have milked away
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