Great Graphic: G7 GDP

The UK is typically the first G7 country to report its official estimate of quarterly GDP figures. Today was the day. Growth in Q2 was spot on expectations, matching the 0.8% pace seen in Q1. The US will issue its first estimate next week. 

Today's US June durable goods order report was somewhat disappointing. This stems from the weakness in non-defense shipments excluding aircraft (-1.0% after May's series was revised to -0.1% from +0.4%), which is used for GDP calculations.  It was sufficient to push the US 10-year bond yield back below 2.5.0% and cap the apparently rate-sensitive dollar-yen rate just below JPY102.  

The 1.4% rise in orders of the same (non-defense, excluding aircraft) was better than expected, but the May series was revised dramatically lower (to -1.2% from +0.7%). Nevertheless, durable goods shipments rose at a 4.1% annualized rate in Q2 after rising 2.2% in Q1, indicating they will likely add to GDP, even if not by as much as it had appeared. In addition, inventories or durable goods also rose to $26.7 bln in Q2 from $19.1 lbn in Q1. This is also a net positive for US Q2 GDP. So while US GDP estimates may be shaved, it is still likely to come in at 3% or just above.

The top Great Graphic was tweeted by Ben Chu and is from Macrobond. It shows GDP figures for the G7 countries compared with the 2008 peak.  In Q2, the UK economy finally and just barely surpassed its pre-crisis peak.  This leaves Italy as the only G7 country whose economy is still smaller.

The lower chart is from the Touchstone blog, which draws on IMF data.  It depicts a different measure of GDP--one that is adjusted for population--or GDP per capita.  By this measure, the UK's economy, like Italy and France, has not returned to pre-crisis levels.  Indeed, the French and Italian lines still have a negative slope.  

There is no "right" measure.  It depends on what the question one is trying to answer.  If it is about the size of the economy, the GDP chart on top offers the clearest answer.  However, if the question is about country's prosperity, the lower chart may be preferable.   Of course, it may be necessary to integrate distributional measures, as well, to get a better sense of how GDP growth is translated into living standards.