Forbes | Obama’s 2012 Re-Election Prospects Suffer An Ominous GDP Report

Posted on May 04 2012 – 6:00 PM – Posted by: Doug Brady

Last Friday’s report by the Bureau of Economic Analysis (BEA) on its first estimate of 1Q2012 GDP growth produced considerable weeping, wailing, and gnashing of teeth, especially among supporters of President Obama.  The BEA reported that real GDP grew at a 2.2% annual rate.  This was lower than the 3.0% rate growth rate reported for 4Q2011, and much lower than would be “normal” for this point in a recovery from a severe recession.

Much has been written about the BEA report.  Most pundits found it discouraging, even alarming.  The term “stall speed” appeared frequently.  Some analysts were encouraged by the fact that consumer spending increased over 4Q2011.  Others lamented that a reduction in government spending subtracted 0.6 percentage points from 1Q2012 GDP, and called for more “stimulus” spending.  However, the analysts seem to have missed the big story in the BEA numbers.

Real business nonresidential fixed investment (RBNRFI) was lower in 1Q2012 than it was in 4Q2011, falling at a 2.1% annual rate, quarter to quarter.  This continued a decelerating trend.  After growing at 15.7% during 3Q2011, RBNRFI slowed to a 5.2% growth rate in 4Q2011 and then fell at a 2.1% rate last quarter.

Why does this matter?  It matters because RBNRFI is what actually drives the economy.  Both real GDP (RGDP) and employment growth are a direct function of RBNRFI.  The notion that “spending” drives the economy is the Keynesian Superstition.

More.

Article source: http://conservatives4palin.com/2012/05/forbes-obamas-2012-re-election-prospects-suffer-an-ominous-gdp-report.html