Better Data Shrinks Q2 GDP to Under 1%

The Trade Deficit came in much worse than estimated when the GDP number of 2.4% annualized was released ten days ago: -$50B vs estimate of -$42B, an $8B drop from May’s -$42B deficit. This is the worst trade deficit since Oct 2008. It is likely that JP Morgan (JPM) will revise downward again, from 1.3% to 0.9%.

The Stimulus is now becoming a drag, as it has passed peak spending and is decreasing each quarter; as is inventory rebalancing (see chart courtesy Goldman Sachs). Goldman sees the drag as peaking at -1.7% in 2011. Absent some sort of tax cuts (not increase next year, as is now baked in with the expiration of the Bush tax cuts), they are close to joining the double-dip camp. As it is, they have reduced their 2011 GDP estimates by 0.9%.

About Duncan Davidson 228 Articles

Affiliation: NetService Ventures

Duncan is an advisor to NetService Ventures, where he focuses on digital media and the mobile Internet.

Previously he was at four start-ups: Xumii, a mobile social service based on a Social Addressbook; SkyPilot Networks, the performance leader of wireless mesh systems for last-mile access, where he was the founding CEO; Covad Communications (Amex: DVW, $9B market cap at the peak), the leading independent DSL access provider, where he was the founding Chairman; InterTrust Technologies ($9B market cap at the peak), the pioneer in digital rights management technologies, now owned by Sony and Philips, where he was SVP Business Development and the pitchman for the IPO.

Before these ventures, Duncan was a partner at Cambridge Venture Partners, an early-stage venture firm, and managing partner of Gemini McKenna, a joint venture between Regis McKenna's marketing firm and Gemini Consulting, the global management consulting arm of Cap Gemini.

He serves on the board or is an adviser to Aggregate Knowledge (content discovery), Livescribe (digital pen), AllVoices (citizen journalism), Xumii (mobile social addressbook), Verismo (Internet settop box), and Widevine (DRM for IPTV).

Visit: Duncan Davidson's Blogs

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