Outsourced to Ryan Avent:
DAVID BECKWORTH directs us to the latest Macroeconomic Advisers estimates of American output, and he publishes this disturbing chart:
Macroeconomic Advisers estimates a monthly GDP figure, and according to their calculations nominal GDP declined in May and June. This doesn’t necessarily mean that a full-on double dip has begun. Monthly GDP is noisy, and Macroeconomic Advisers notes:
Monthly GDP declined 0.4% in June, the second consecutive monthly decline of this magnitude. The May decline was accounted for by inventory investment, while the June decline was more than doubly accounted for by net exports. Over this two-month span, domestic final sales posted moderate gains, largely reflecting growth of consumer spending. The level of monthly GDP in June was 1.5% below the second-quarter average at an annual rate. Our forecast of 2.4% growth of GDP in the third quarter includes a 1.1% increase in monthly GDP in July, mainly reflecting an assumed reversal of the weakness in net exports in June.
They’re still forecasting growth in the third quarter. But this is disconcerting. And the Fed response to a potential decline in NGDP—merely holding the size of its balance sheet steady—is clearly inadequate.
This is, in case you were wondering, very bad. I’m glad everyone’s mind is focussed on what is important.