Michael Pento shares his thoughts on today's revised GDP report

Friday, August 27, 2010
By: Michael Pento

According to today’s release from the BEA, “the second estimate of the second-quarter increase in real GDP is 0.8 percentage point, or $25.0 billion, lower than the advance estimate issued last month, primarily reflecting an upward revision to imports and downward revisions to private inventory investment and to exports that were partly offset by an upward revision to personal consumption expenditures.” So we are consuming more and producing less and GDP was just barely positive because the BEA managed to once again under estimate the genuine rate of inflation.

They claim inflation is increasing at a 2% annual rate. But anyone who pays; taxes, insurance, healthcare, education, food and energy costs will tell you that is a woefully inaccurate measurement—even if one is just considering domestically produced goods and services.

I suppose as Americans we should be proud that our National defense expenditures increased 7.3%, compared with an increase of 0.4% in the prior quarter. But basing a recovery on military spending is dubious at best.

All told, today’s GDP revision for Q2 was reported to be 1.6% and since July and August data was extremely weak in comparison, Q3 GDP will be even worse. Chairman Bernanke reiterated today at Jackson Hole that the Fed will do whatever it takes to foment inflation. And as a consequence, my next prediction is that the economy will suffer to an even greater extent, marked by a worsening of the stagflationary environment. Euro Pacific Site

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.