U.S. growth has continued, one official measure shows
By New York Times
A key measure of economic output continued to grow in the spring, easing fears that the United States is entering a recession, but adding to confusion about the state of the economy.
Gross domestic income, adjusted for inflation, increased 0.3% in the second quarter, the Commerce Department said Thursday. That was down from 0.5% growth in the first quarter. The increase in the second quarter was the equivalent of a 1.4% annual growth rate.
The continued growth in gross domestic income is an encouraging sign for the economy, but also perplexing because a better-known measure of economic output, gross domestic product, has declined for the past two quarters.
Commerce on Thursday said GDP, adjusted for inflation, fell 0.1% in the second quarter. That represented a modest upward revision from the government’s preliminary estimate last month, which showed GDP falling 0.2%. (The numbers will be revised again next month.)
The conflicting signals are a mystery because the two measures, in theory, should be identical. They measure the same thing, economic output, from opposite sides of the ledger: One person’s spending is someone else’s income. In practice, the two indicators do not always match because the government cannot measure the economy perfectly, but they have rarely diverged this much for this long.
The divergence matters because both numbers cannot be right, and some economists believe the figure on income is likely to be closer to the mark, because the government collects more detailed data on income. Both the Bureau of Economic Analysis, which produces the numbers, and the National Bureau of Economic Research – the semiofficial arbiter of when recessions begin and end in the United States – recommend looking at an average of the two indicators. By that measure, economic output grew in both the first and second quarters, and growth actually accelerated somewhat in the spring.
Diane Swonk, chief economist for the accounting firm KPMG, said the story being told by the income measure is more consistent with other data showing continued strong job growth and solid consumer spending. Those indicators, taken together, show an economy that is still growing, but more slowly than it did last year. At the same time, high inflation makes people feel like they are losing ground.
“We weren’t in a recession from an economists’ standpoint, but that doesn’t really matter,” Swonk said. “It felt like a recession to so many people in the first half of the year.”