Does the improved American economy doom Obama's chances?

[Naked Gents Rut]

The Commerce Department recently revised the second quarter U.S. GDP growth numbers upwards to 3.3%.

http://news.xinhuanet.com/english/2008-08/29/content_9731659.htm

GDP growth, particularly in the second quarter of an election year, is one of the best predictors of the outcome of a U.S. presidential election. In fact, the incumbent party has only lost the presidential election once since 1956 when second quarter GDP growth was above 2.6%.

http://www.lawrence.edu/news/pubs/lt/fall04/forecasting.shtml

Does the robust U.S. GDP growth in the second quarter of 2008 mean Obama is doomed in November?

[Japher]

It never matters. The American public never listens to facts and truth. We just make up what we want, vote out of ignorance, and complain.

[Darius871]

It's not the GDP growth that matters, but which segments of society actually experience the benefits of that growth, and all that crap.

[Ecthy]

I am sure the incumbent party has lost the elections more than once since 1956

[Dinner]

Originally posted by Japher
It never matters. The American public never listens to facts and truth. We just make up what we want, vote out of ignorance, and complain.

Yup.

[Riesstiu IV]

Originally posted by Japher
It never matters. The American public never listens to facts and truth. We just make up what we want, vote out of ignorance, and complain.

Never has more truth been uttered in a single phrase.

[Colon™]

Originally posted by Japher
It never matters. The American public never listens to facts and truth. We just make up what we want, vote out of ignorance, and complain.

The thing is that the numbers actually are pointing to an economy on the verge of a recession. A quarterly GDP reading that got revised upwards (and which was boosted by tax rebates) doesn't change that. It's only a preliminary reading too. To claim an improved economy is very silly.

[Naked Gents Rut]

The thing is that the numbers actually are pointing to an economy on the verge of a recession. A quarterly GDP reading that got revised upwards (and which was boosted by tax rebates) doesn't change that.

Given that a recession is by definition two consecutive quarters of negative GDP growth, I think a quarter of 3.3% growth (quite high for the U.S. economy) does in fact matter.

See if you can spot the improvement in this graph...

[Imran Siddiqui]

a recession is by definition two consecutive quarters of negative GDP growth

That would also be somewhat of an outdated definition to most economists.

http://en.wikipedia.org/wiki/Recession

A recession is a contraction phase of the business cycle. In the USA, the National Bureau of Economic Research (NBER) defines it more broadly as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."[1] Newspapers often quote the rule of thumb that a recession occurs when real gross domestic product (GDP) growth is negative for two or more consecutive quarters. However, not only is this a flawed measure that fails to register several official (NBER defined) US recessions, the quotation has been taken out of context from a 1974 New York Times article that listed a number of rules of thumb, the rest of which have been ignored [2].

[Theben]

Personally I think Palin will scare away a lot of moderates, but anything is possible at this point. Whoever screws up the most will lose.

[Colon™]

Originally posted by Naked Gents Rut


Given that a recession is by definition two consecutive quarters of negative GDP growth, I think a quarter of 3.3% growth (quite high for the U.S. economy) does in fact matter.

See if you can spot the improvement in this graph...

First of all, the American has been holding up well, but that's the most positive thing that can be said.

Second, that definition is extremely arbitrary. I actually prefer to speak of downturns, rather than recessions because economic growth is not a black/white thing. As if all is well when an economy grows 0% for an entire year (= no technical recession!), rather than experience a 0.5% decline in two consecutive quarters and a 5% growth in the two other quarters (= technical recession!). That definition also doesn't consider structural population and productivity growth.

Third , the headline GDP number. Is. Not. A. Leading. Indicator. The result of one quarter has does not have any bearings on the result of the following quarter.
OTOH the composition of GDP growth does give a few clues. The falling expenditures on durable goods and investments in equipment & software, points to troubles ahead (since those are very sensitive to changes in the economic climate).
Furthermore you have jobless claims peaking at levels seen in the previous downturn and a significant decline in July's consumer's expenditures (following a small drop in June), making it a distinct possibility consumer's expenditures will fall in the 3rd quarter.

It's silly to suggest the economy will help the incumbent just because of a quarter that was boosted by tax rebates, while the labour market is sickly and Americans are patently obvious not feeling well economically.

[Naked Gents Rut]

Third , the headline GDP number. Is. Not. A. Leading. Indicator. The result of one quarter has does not have any bearings on the result of the following quarter.

No kidding. GDP growth in the second quarter of an election year is a strong predictor of the result of the election, however, which is what this thread is about.

Furthermore you have jobless claims peaking at levels seen in the previous downturn and a significant decline in July's consumer's expenditures (following a small drop in June), making it a distinct possibility consumer's expenditures will fall in the 3rd quarter.

Why would you expect consumer expenditures to fall in the third quarter when consumer confidence has been increasing since June?

http://www.conference-board.org/economics/ConsumerConfidence.cfm

[Kidlicious]

McCain might get a few votes from it, and the election will be close, so who knows.

[MOBIUS]

Americans are stupid, Obama is black.

McCain doesn't need encouraging economic stats to win.

[Colon™]

Originally posted by Naked Gents Rut


No kidding. GDP growth in the second quarter of an election year is a strong predictor of the result of the election, however, which is what this thread is about.

Something you're happily ignoring is that the reason the author believes Q2 is a good predictor is that it supposedly takes time for the effects of weak growth to be felt. Considering consumer cut back expenditures on big-ticket items (first thing consumers cut back on when times are bad) despite getting $500 billion in their hands, the high inflation, the increasing unemployment and the plunge in consumer confidence, I gather people are already having the feeling the economy isn't doing well.

Why would you expect consumer expenditures to fall in the third quarter when consumer confidence has been increasing since June?

http://www.conference-board.org/econ...Confidence.cfm

And expenditures couldn't have risen in May because confidence fell, and they couldn't have fallen in July because confidence rose. Yet that's exactly what happened. A 5 points rise from July also doesn't compare with the 50-60 points fall since early 2007.

As I said, there was a big drop in July and considering the absence of supporting factors (rising unemployment, no more tax rebates...) there's a good possibility August and September won't make up for it.