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Saturday, August 30, 2008

GDP ex Import Inflator: Third Straight Quarter of Decline

Due to a rise in the price of oil from less than $110 to $145+, the import portion of the GDP Deflator Inflator raised Real GDP by 4.6% (what is the GDP Deflator? click here). This is more than 2x the level seen at any other point during this decade and the highest amount EVER (we have to go back to Q1 1974 and Q1 1980 for levels even remotely close to that of this past quarter).

Had the contribution of imports on the GDP Deflator Inflator stayed the same as last quarter (which was historically large), GDP goes from the 3.3% as reported by the BEA to 0.9% for Q2. If the deflationary impact of imports were removed completely from the equation, GDP goes to -1.3% and shows GDP contraction for the third straight quarter.

Which sounds more reasonable to you?

Source: BEA