Final Q2 GDP Disaster: 1.25% Growth Comes Below Lowest Estimate

Tyler Durden's picture


So much for the US recovery (we will never tire of saying that). After the first Q2 GDP revision bubbled up from 1.5% to 1.7%, the sellside brigade was confident that the rate of growth would continue and final Q2 GDP would be in line. Instead, we got an absolute shock of a print, with the final Q2 GDP print coming in at a ridiculously low 1.25% (rounded up to 1.3%), below the lowest Wall Street estimate of 1.4%, and the lowest number since the revised 0.1% reported in January 2011. Here is the final GDP trendline: Q4 2011: 4.1%; Q1 2012: 2.0%; Q2 2012: 1.25%. Luckily, at least "housing has bottomed." The reason for the major contraction in the final print: a downward revision to all favorable components except Government which detracted the least from growth in years at just -0.14%. Of note - Personal Consumption was 1.06%, down from the 1.20% per the second revision. If nothing, we now know just what data Bernanke was looking at on an advance basis to come up with QEternity, and we also know the reason for the media and administration's all in gamble to reflate housing yet again. If the housing market does not go up courtesy of infinite cheap leverage, it could be curtains for the Bernanke reflation experiment.

Luckily, the centrally-planned policy vehicle once upon a time known as "the market" refuses to react to this horrendous, if only for the meaningless economy, news.

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Thu, 09/27/2012 - 08:48 | 2834951 mayhem_korner
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The only other place we've seen sequential 2 and 3+ sigma events is with the replacement NFL refs.  Go figure.

Thu, 09/27/2012 - 08:51 | 2834972 slaughterer
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I want Hatzius's take on this, IMMEDIATELY!

Thu, 09/27/2012 - 09:01 | 2835010 Popo
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The housing market cannot possibly reflate for one simple reason:   The number of buyers is microscopic compared to the number of retiring boomers who are sitting on the bulk of the nation's real estate value, and are just now beginning to sell.    Demand for new homes is pissing into the wind of demand to cash out of nest-eggs.   Bernanke is dreaming.   We are looking at a generational changeover.  No amount of short term policy can counter the tsunami of new inventory as the world's wealthiest generation liquidates it's most expensive assets.  


Thu, 09/27/2012 - 09:05 | 2835026 GetZeeGold
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Boomers.....dam.....totally forgot about those guys.


Thu, 09/27/2012 - 09:17 | 2835071 Thomas
Thomas's picture

They screwed the pooch by making QE open ended: now investors have nothing left to look forward to. I gave my kid a GameBoy when he was young just to have something worthless to take from him punitively. These guys got nothin' left. 

I've never been more sanguine about my large--55% of total total assets large--precious metal metal position (and another 20% in energy crap.) Bankers Gone Wild. They will not be able to claim they weren't warned. The whole World is watching this cluster fuck.

Thu, 09/27/2012 - 09:22 | 2835083 EscapeKey
EscapeKey's picture

now investors have nothing left to look forward to.

Oh yes they do - the tap opened ever-wider until the entire system reboots.

Thu, 09/27/2012 - 09:36 | 2835133 HobbyFarmer
HobbyFarmer's picture

To hear the collective outrage over the NFL ref debacle around my office, one would be led to believe that there is hope for the US to regain our senses, collect ourselves, and rage against the people (bankers/politicians) who caused this mess.

However, when I try to talk with people about pressing things (like the complete collapse of our financial system) I tend to have nobody to converse with.


Thu, 09/27/2012 - 09:49 | 2835164 Colonel Walter ...
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Give 'em circus and beer!

Thu, 09/27/2012 - 12:06 | 2835636 A Nanny Moose
A Nanny Moose's picture

Beer is but liquid bread.

Thu, 09/27/2012 - 10:15 | 2835274 clawsthatscratch
clawsthatscratch's picture

Sad ain't it...

i hear the same crap in class (its free) and amusingly its a real estate class (contract law). I hear the most funny things the uniformed have to say about how things are going. I convince myself i am from some alternate universe otherwise i would be in the majority. I also keep my mouth shut as I notice people have no clue and don't want to wear the "class kook" hat. 

Thu, 09/27/2012 - 10:38 | 2835343 Cole Younger
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People have no clue as they are brain washed by the MSM. 

Thu, 09/27/2012 - 10:57 | 2835414 ptoemmes
ptoemmes's picture

Let the reaal NFL Refs run the economy.  The fill-ins seem to already be doing that.

Thu, 09/27/2012 - 12:06 | 2835634 A Nanny Moose
A Nanny Moose's picture are making it difficult to ignore the conflagration in Rome. Best to keep to yourself, or you willl be branded a witch, for being able to see the future.

....and what do we do with witches???

Thu, 09/27/2012 - 09:27 | 2835103 SokPOTUS
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You gave your kid a toy just to be able to take it away as punishment?  That's Evil.  And Fantastic!  Multiple green arrows for you...

Thu, 09/27/2012 - 11:04 | 2835437 ElvisDog
ElvisDog's picture

These guys got nothin' left

Couldn't the Fed hint at increasing the $40B a month to some unspecified amount if "future conditions warrant"? That would give speculators something to look forward to.

Thu, 09/27/2012 - 09:47 | 2835160 petolo
petolo's picture

Yeah, we boomers are a bubble but i for one have my own SS, healthcare and food stickers: PMS in the back forty , pumping iron and good homegrown food. ZH and African radio for entertainment and inspiration. THANKS ALL!

Thu, 09/27/2012 - 09:10 | 2835044 DavidC
DavidC's picture

Spot on.


Thu, 09/27/2012 - 09:12 | 2835053 Arnold Ziffel
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Add that massive tsunami to the already 10 million in shadow inventory that are not listed and we get 20 years of supply.


It gets crazier; I just read a new developer got approval to build 4,000 houses down the road. Who is financing this stuff?

Prices will never stabilize due to this massive oversupply + the reckless zero down policy.


Thu, 09/27/2012 - 09:21 | 2835078 EscapeKey
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Who is financing this stuff?

The US taxpayer.

Thu, 09/27/2012 - 09:36 | 2835082 Popo
Popo's picture

Oh I highly encourage them to build 20,000 new units.  Make it 30,000.  Oh hell make it 100,000 new units "down the road".   

As a renter I can't be more thrilled when I hear about new luxury condos being built.    Go ahead dumbasses,  triple that inventory.  Quadruple it into the face of falling salaries,  credit tightening,   increasing unskilled labor and of course:   the great Boomer die-off.    Build build build!  

I look forward to living cheaply in your expensive houses!  

Thu, 09/27/2012 - 10:41 | 2835355 Cole Younger
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You will live cheaply until Ben starts printing trillion dollar bills...

Thu, 09/27/2012 - 10:39 | 2835347 exi1ed0ne
exi1ed0ne's picture

It's working for the Chinese.*


* If your time horizon for investment return is the length of time it takes to do the construction.

Thu, 09/27/2012 - 09:15 | 2835064 crusty curmudgeon
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Add to this the generation of slaves to student loans who won't be able to get a mortgage on their own.  Well, it spells trouble in river city.

Thu, 09/27/2012 - 11:16 | 2835468 Liposuction
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You're only a slave to it if you choose a new car, cable, iDevice, dinner out, drinks at the bar, hipster clothing etc etc etc over paying your goddamn student loan.

Thu, 09/27/2012 - 09:17 | 2835069 King_Julian
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+1 for solid ZH post. Excellent and depressing. Will repost this with full credit given.

Thu, 09/27/2012 - 09:21 | 2835077 TuesdayBen
TuesdayBen's picture

Nah, the boomers won't sell their homes - their 30ish children got no place to go...

Thu, 09/27/2012 - 09:43 | 2835148 Popo
Popo's picture

Assuming, you're talking about inheritance (as in, the parents have died):    Statistically speaking, the kids pretty much always sell the house.  

For one,  there are on average 2.5 kids.  They sell it and split the equity.  

Secondly,  statistically most kids don't live near their parents any more.    

The third reason is more cultural:  people would just rather not live in their parents house if they can help it -- and in general their spouses feel even more strongly about it.

But whatever the reasons, the stats say the houses get dumped on the market just about every time.

Thu, 09/27/2012 - 12:27 | 2835729 A Nanny Moose
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If the kids were lucky, the parents HELOC'd out a motorhome.

Thu, 09/27/2012 - 09:37 | 2835134 rbg81
rbg81's picture

Another trend is that while housing prices and mortgage rates have been going down, property taxes have been heading up, up, up.  Don't look for this trend to reverse anytime soon.  I've looked at some properties lately where the taxes are so high, they outstrip the mortgage. I'm tempted to ask:  where's the second house I'm paying for?

Thu, 09/27/2012 - 15:46 | 2835645 MachoMan
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I'm tempted to ask:  where's the second house I'm paying for?

it's devouring bonbons while you're waiting in her line desperately trying to get some document approved by the city that has been imposed as an additional tax without naming it as such.  The best part is, when you buy this house, they throw in the diabetes for free.

Thu, 09/27/2012 - 12:23 | 2835710 Cpl Hicks
Cpl Hicks's picture

I've looked at some properties lately where the taxes are so high, they outstrip the mortgage.


Interesting, where is this happening? Give us a city/zip code.

Thu, 09/27/2012 - 12:00 | 2835622 A Nanny Moose
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...and their kids are moving back home with them, because what jobs they can find, are at McDonalds. At least those nursing degrees will pay off. Think of how much money we can save by children actually caring for their aging parents.

Thu, 09/27/2012 - 09:56 | 2835181 drivenZ
drivenZ's picture

ask and ye shall receive....


Mr. Hatzius....

3. The Commerce Department revised down its estimate of Q2 GDP growth to 1.3% (quarter-over-quarter, annualized) from 1.7% previously, suggesting a more marked deceleration relative to 2% growth in Q1. The downward revision was fairly broad based, with personal consumption spending revised down to 1.5% from 1.7% previously, and non-residential fixed investment growth down to 3.6% from 4.2%. Inventory accumulation also was revised lower, partly because of the impact of the 2012 droughts. This is a drag on current estimates of GDP growth, but suggests that production is more in line with final demand.


BOTTOM LINE: Data released this morning send mixed signals. On the one hand, durable goods orders decline more than expected in August and Q2 GDP growth is revised down from 1.7% to 1.3%. On the other hand, initial jobless claims drop sharply in the latest week and the preliminary benchmark revision to the establishment survey points to a higher level of employment. On balance, however, we interpret this morning’s data as soft. We cut our Q3 GDP tracking estimate from 2.1% to 2.0% and the August CAI fell one tenth to 0.7%.

We, Jan Hatzius, Alec Phillips, Jari Stehn, Andrew Tilton and Shuyan Wu, hereby certify that all of the views expressed in this report accurately reflect our personal views, which have not been influenced by considerations of the firm's business or client relationships.


Thu, 09/27/2012 - 08:52 | 2834975 CClarity
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Apple just priced at $666.  Significant among the very Christian? Or anyone?

Thu, 09/27/2012 - 08:58 | 2835005 JPM Hater001
JPM Hater001's picture

I've been thinking about this...We are told to watch for the sign of the beast and no one said it would be printed on someones forehead.

This could be the sign now couldn't it.

Thu, 09/27/2012 - 09:10 | 2835045 krispkritter
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See my link a few posts below... 0_o

Thu, 09/27/2012 - 08:49 | 2834959 aint no fortuna...
aint no fortunate son's picture

stocks surge on news that hope, dreams and puppy kisses will boost the market

Thu, 09/27/2012 - 08:51 | 2834971 krispkritter
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There ain't no hope, only bad dreams, and the puppy's on the Whitehouse dinner menu...BUT it's a beautiful sunny day in Amerika!


Thu, 09/27/2012 - 08:51 | 2834973 Debtonation
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Good is Good, Bad is Gooder

Thu, 09/27/2012 - 10:42 | 2835365 exi1ed0ne
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Mmmm.  Warm, steaming skittles.  They're best when freashly shart from the unicorn.

Thu, 09/27/2012 - 08:50 | 2834965 Stuart
Stuart's picture

This is disastrous for deficit projections, a total train wreck for tax revenues. 

Thu, 09/27/2012 - 14:39 | 2836269 Offthebeach
Offthebeach's picture

Taxes are so over. They're a barbaric relic. All hail our central bank overlords! Long may they print!

Thu, 09/27/2012 - 08:50 | 2834966 Pants McPants
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I trust "personal consumption expenditures" was normalized so as to not include pesky, inconvenient items like food and fuel, correct?  How else are we supposed to get a realistic view of growth?


Thu, 09/27/2012 - 09:02 | 2835019 RSloane
RSloane's picture

Food and gas are discretionary items. Gov't interpretation: People are not being discreet enough. Get with the program,  people.

Thu, 09/27/2012 - 08:51 | 2834970 ShorTed
ShorTed's picture

MORE QE! oh, uh, er...nevermind.

Thu, 09/27/2012 - 08:55 | 2834977 slaughterer
slaughterer's picture

QE-KITCHENSINK a coming down the Hilsenhooter in 3,2,1.... 

Thu, 09/27/2012 - 09:27 | 2835104 DeadFred
DeadFred's picture

No, they're on their own this time. The question is how long will it be before rah-rah permabulls become aware of the lack of rumors? Perosnally I wouldn't have used my last bullet on a 1.2% print but maybe he knows about more than this.

Thu, 09/27/2012 - 08:52 | 2834976 Jason T
Jason T's picture


Thu, 09/27/2012 - 08:53 | 2834979 rsnoble
rsnoble's picture

another "but" day and futures ramp.  I'm so sick of this horseshit, just hurry up and fucking collapse already before my canned goods expire.  One stupid ass lie after another.

Thu, 09/27/2012 - 08:54 | 2834988 EscapeKey
EscapeKey's picture

Canned goods never really expire. They just taste bland after a while.

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