Evan Soltas
Jul 27, 2012

Another NGDP Slowdown

The latest national accounts numbers came out this morning. The headline number is obviously the 1.5 percent year-over-year growth rate of real GDP for the second quarter of 2012. Bill McBride over at "Calculated Risk" discusses the revisions to past data, which basically smoothed out the level of real output through the recovery by tweaking downwards the bounce-back in 2009 and speeding up slightly the slowdown in 2011.

There's one more data point you need, however, from this report. It's the 3.0 percent annualized quarterly percent growth rate of nominal GDP seen in the most recent quarter, the slowest since the first quarter of 2011.In my mind, the latest NGDP data raises questions about the Fed's commitment to sustaining a recovery, arguably more so than any other number. It'd be one thing if the Fed helped support aggregate demand out of recessionary territory -- that'd be level targeting -- but stabilizing just the rate of growth given the gap we already have, that's terribly little to ask. And yet here we are, with an NGDP gap still growing larger years after the recession ended, with below-trend growth when above-trend growth is warranted.

We're not asking you to climb out of your own grave. Just to stop digging.