This meant the rate of economic growth for the entire year of 2025 was only 2.2%, as compared to 2.8% for all of 2024. Thus, despite Trump’s claim of “the best economy ever,” Trump’s trade war with the world and his efforts at mass deportations only served to slow the economy.

The biggest drag on economic growth in the fourth quarter of October to December was a drop in spending on goods and services by the federal government. This is due to the impact of DOGE employment cuts hitting in October, and the non-payment of government contracts and their workers during the shutdown (federal workers do get paid when a shutdown ends).

At the same time, the Personal Consumption Expenditures price index, or PCE, on a year over year basis accelerated slightly from 2.8% in the September to October period to 2.9% in the last three months of the year. Taking out food and energy, whose prices rise and fall more than other goods and services, the so-called “core” PCE rose 3% in the October to December period, up from 2.8% in the previous three months.

Trump has said that the war on rising prices is done, and declared victory on the affordability front, despite the reality of consumer prices rising at a faster rate. But the Federal Reserve Bank, which uses the PCE as the measure of inflation, will be looking at the data, making it less likely to lower interest rates in the near future.

#SanJoseCA #CA #CapitalismAndEconomy #GDP

While the GDP report for January through March showed negative growth, this was mainly because of the large surge in imports to try to beat Trump’s tariffs. If all other sectors had stayed the same, the import surge would have dragged the economy down by 4.7%. Then in the second quarter of the year, imports dropped by an even larger amount as Trump’s tariffs began to bite, which would have caused GDP to grow by 5.2%.

So, when we wash out the boom and bust in imports, by putting the first two quarters together, there was an average of 1.25% annual rate of growth. Because there was also a big shift in inventories of unsold goods, which surged in the first quarter as imports piled up, and then dropped in the second three months as they were sold off, economists often look at final sales to domestic private purchasers, which also excludes changes in government spending. This figure was only up 3%, as compared to a 5.3% rate of growth in the second quarter of 2024.

#SanJoseCA #CA #CapitalismAndEconomy #GDP #Trump #Tariffs #TradeWar

On Friday morning the Department of Commerce released its latest report on Gross Domestic Product or GDP for the July through September period. While President Trump hailed the headline figure of 3.5% growth in GDP, there were serious signs of weakness in the quarterly report. Most the of the growth (2.1% of the 3.5%) actually came from a buildup of inventories of goods on shelves and in warehouses, not from actually selling more goods and services. GDP measures the production of goods and services, but products that are not sold can pull down future production as businesses try to reduce their stocks of inventories.

The latest GDP report also showed that investment spending on business plant and equipment and residential structures (homes, townhomes, condos, and apartments) actually fell from July through September. While the fall was small (less than one-tenth of one percent), it is the first drop in three years. For investment to fall at a time when the economy is booming and corporations are flush with cash from the big corporate tax cuts that went into effect this year is a sign that businesses don’t think that the good times will continue. While the stock market itself is a poor indicator of the future of the economy, almost every recession since World War II (when the government began collecting more economic data) has been led by a fall in business spending on structures and equipment or in housing construction.

The biggest fall was in the construction of new residences, which has been hard hit by rising interest rates and increases in home prices that have raced ahead of smaller gains in wages. Investment spending in new residences has now fallen for three quarters (nine months) in a row and the decline seems to be picking up. The decline in business structures (factories, offices and other commercial buildings) was even bigger but offset by an increase in spending on computer software.

The weaknesses in the GDP report just add to the list of worries about the economy. The number of corporations beating their sales estimates has been falling, adding another concern to the stock market. Trump’s trade war with China is set to escalate in January, when tariffs on about half of all imports from China jump from 10% to 25%. Worries about debt are on the rise, from countries like Argentina and Turkey, which borrowed big-time in U.S. dollars to the ballooning market for so-called ‘leveraged loans,’ made by non-banks to corporations and now estimated at more than $1.6 trillion.

#SanJoséCA #PeoplesStruggles #GDP #stockMarket #sp500

San José, CA – On Jan. 30, the Commerce Department reported that Gross Domestic Product, or GDP, fell by a very small amount (0.1% at an annual rate) in the last three months of 2012. The drop in GDP was largely because of a big drop in federal government purchases of goods and services, in addition to a drop in inventories (meaning that stores sold goods that were sitting on their shelves instead of having more produced) and a drop in exports.

While much of the media and even some economic textbooks describe a recession as two quarters or six months of decreasing GDP, this is not the official definition of a recession. For example, to use this rule, there was no recession in 2001, since GDP did not decline for six months in a row. But to deny that there was a recession wouldn’t make sense, given the large economic downturn and loss of more than 2.5 million jobs.

The official definition of a recession uses employment, business sales, personal income and industrial production to measure when there is a wide and long-lasting economic downturn or a recession. Since these measures do not move in lockstep, employment is the most important of the four, with the peak and following decline in the number of total jobs being the official definition of when a recession starts. Recessions are also usually preceded by a large drop in spending on housing (as in the last recession) or spending on new business plant and equipment (as in the 2001 recession).

However the GDP report showed that businesses continued to spend on new plant and equipment, and gains in housing construction continued. Then on Feb. 1, the U.S. Department of Labor released its report on the labor market in January, showing that the economy added 155,000 jobs. These are strong signs that the economic expansion which officially began in June of 2009 continues, at least for the time being.

However the drop in GDP caused by federal government cutbacks is a warning that the austerity drive by government is going to weaken the economy. While state and local governments have been cutting spending for years (including even more cuts in the last three months of 2012), federal government spending has been holding up. But with the automatic spending cuts scheduled for March 1, and years of more spending cuts in the works under the 2011 Budget Control Act, decreases in federal spending are more and more likely.

Since the end of World War II, the U.S. government has used Keynesian policies to change interest rates, government spending, and taxes to try to combat recessions. There was a large effort by the Obama administration to cut taxes, increase spending and maintain low interest rates to put an end to the last recession, which was the worst since the Great Depression. Federal government borrowing and spending have helped to shorten recessions; they have not been able to prevent them, as recessions are a fundamental part of a capitalist economy.

Under capitalism, workers are not paid for the full value of what they produce, which is the source of profits. This limits the ability of the vast majority of people, who have to work for others, to be able to spend. At the same time, the profits from the exploitation of workers is reinvested in new plant, machinery and equipment, increasing the ability to produce. The contradiction between the limits on spending and ever-growing ability to produce lead to what Marx called crisis of overproduction, and which are commonly called recessions today.

The government Keynesian policy tries to use deficit spending to stimulate the economy out of a recession. This leads to an increase in the federal government debt, which both Republicans and many Democrats are using to push more austerity – higher taxes on working people (like the payroll tax) while cutting government spending on programs that can actually help working people (like financial aid for college). Not only is this unfair, but it also slows the economy, leading to fewer jobs and more unemployment. At its worst, austerity can push a weak economy into a recession and even a depression. This is what has happened in Greece and Spain, where the austerity measure demanded by Germany and other euro-zone countries have pushed their economies into deep depressions, with unemployment rates of 25% and more.

#SanJoséCA #GDP #austerity #GrossDomesticProduct

San José, CA – On July 29, the Commerce Department released its report on Gross Domestic Product or GDP for the Second Quarter (April to June) of 2011. GDP, which measures the value of goods and services produced in the United States, rose at only a 1.3% annual rate, much slower than most mainstream economists expected. Even worse, the First Quarter (January to March) economic growth was cut from an earlier estimate of 1.9% to just 0.4%.

Slow economic growth of less than a 1% annual rate in the first half of the year shows that the economy is on the edge of going into another downturn. Household or consumer spending all but stalled in the second quarter, growing at a 0.07% rate. This is not surprising given the high and rising unemployment rate, which reached 9.2% in June. There was also almost no increase in the sales of new homes in the first half of the year, as high unemployment and a huge overhang of foreclosed homes cut into new home sales.

U.S. net exports (exports minus imports) were also almost flat, increasing at less than two-tenths of one percent (0.2%) annual rate. The ongoing financial crisis in Europe slowed economic growth there, while rising inflation in Asian nations led governments to raise interest rates, slowing their economies. The Japanese economy suffered from a tsunami and melt-downs of nuclear power plants. These economic problems abroad cut into their purchases of exports of U.S.-made goods.

Spending by U.S. businesses on new plant, equipment and inventories of finished goods also slowed sharply as compared to a year ago. This was mainly due to a drop in the buildup of inventories, as spending on new plant and equipment has remained low except for a spurt of equipment purchases in the first half of 2010. Corporations are sitting on record amounts of cash (nearly $2 trillion), but are not spending it on new plant and equipment or hiring back workers.

Last, but not least, there were actually drops in government spending in both the first and second quarters of this year. The biggest drop was in federal government spending, especially in the first quarter (January to March). In the first half of the year, federal government spending on goods and services fell at about a 0.64% annual rate, the biggest drop in ten years. In both quarters, state and local governments also cut spending. Almost all state and local governments have to balance their budgets, and the loss of federal stimulus moneys is leading to spending cuts.

In addition to the dismal GDP report for the first and second quarters, the Commerce Department also revised their reports for previous years. Estimates of GDP were revised down for both 2008 and 2009, showing the recession to be worse (as measured by GDP) than was previously reported. This downward revision pulled the estimate of the most recent GDP below the previous high in GDP, meaning that it is too soon to say that the recession is officially over.

While GDP or production was revised down, the report also said that corporate profits were revised up, by 8.3% in 2009, and 10.8% in 2010. While the labor market is still down almost seven million jobs since the recession began, and production (measured by GDP) is almost, but not quite back, corporate profits are up almost 14% from their pre-recession peak, after adjusting for inflation.

With economic growth so weak, there is a growing chance of a so-called “double-dip” where the economy starts to fall again before it reaches its previous high point. The biggest danger comes from the bipartisan effort in Washington, D.C. to cut federal government spending. With the economy already on the edge of another downturn and the other engines of economic growth (consumers, businesses, the rest of the world, and state and local governments), sputtering at best and going down at worst, this effort to cut the federal government deficit by cutting spending will make the economy even worse than it is today and could lead to another disastrous downturn.

#SanJoseCA #Labor #Unemployment #PeoplesStruggles #recession #Capitalism #economy #GDP #doubleDipRecession