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Home Publications Blogs Beat the Press AP's Economist Sources Are Wrong: Business Investment Will Contribute to Growth in the Second Quarter

AP's Economist Sources Are Wrong: Business Investment Will Contribute to Growth in the Second Quarter

Saturday, 27 July 2013 08:18

An AP story that ran in the NYT told readers:

"business investment is not likely to help economic growth in the April-June quarter, economists said. That is because the government measures shipments, rather than orders, when calculating business investments’ contribution to growth. Shipments fell in June. But the increase in orders this spring suggests shipments will rise in the July-September quarter and add to growth."

The first part of this is wrong and the second part is questionable. The data for the months April, May, and June show shipments of non-defense capital goods increasing at a 5.4 percent annual rate compared with shipments in the first quarter. This is a nominal figure, but since inflation in investment goods has been close to zero, this number is likely to be close to the real growth rate for the quarter.

The predicted growth for the third quarter based on the rise in orders in June is also dubious. The main reason for the rise was a jump in aircraft orders. These orders are placed well ahead of expected delivery dates. Aircraft manufacturers will not necessarily up their production schedules in the third quarter simply because they have more orders for planes that may not be delivered until 2016 or even later. 

Comments (2)Add Comment
written by kharris, July 29, 2013 9:51
Capital goods shipments ex-military were up in Q2, true enough. However, Boeing data show that domestic deliveries of aircraft were flat in Q2 vs Q1 at 46 planes and Census data show that capital goods shipments ex-military and aircraft were down in Q2 vs Q1. It is apparently the rise in shipments of aircraft overseas (133 planes in Q2 vs 91 in Q1) that boosted non-military capital goods shipments. We should look for the rise in aircraft deliveries in the net export component of GDP, not in capital spending. So it looks like AP's economists have at least a reasonable shot at being right.
written by http://www.sportszone.co.uk/my_profile/blog-view/blog_116593.htm, August 05, 2013 10:45

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.