Closer Look At The Second Quarter GDP

We got the second quarter GDP that was better than some expected(-2.8 % to 0.7 %). The consensus was -1.2% but the actual data was -1% . I have to admit it was much better than I was looking for. We moved up from -5.5 % in first quarter to -1% in second quarter, that was amazing, but here is the catch it was mainly due to government spending.
Please pay attention year-on-year growth for real GDP declined by 3.9%, after contracting 3.3% in the fist quarter, that would be a cause for concern.

The rate of decline in the latest quarter was due to a slowing in the decline in inventories, less negative business fixed investment, less negative housing, a gain in government spending, and a narrowing in net exports. The big negative was a drop in personal consumption.
Sorry I didn't want to repeat "less negative" several time in one paragraph, but all we got was "less negative" news. ;)
OK! lets get serious.

I'm going to take a closer look at second quarter GDP:

1)Government Spending raised +5.6%

2)Consumer Consumption dropped -1.2% .It was forecast to drop 0.5%. Obviously the high unemployment won't get better in near future and consumption should drop farther in 3rd quarter.

3)Inventories dropped by -0.83% if we get the recovery as bulls expected it should be very helpful, because companies have too boost their production to catch up.

4)Investment dropped by -13.5%. Inventories dropped at a record $141.1 billion annual pace, after a $113.9 billion decline.

5)Net Exports increased by +1.38% due to sharp drops in import.The trade gap shrank last quarter, preventing a steeper decline. The gap between exports and imports fell to $339.3 billion at an annual pace from $386.5 billion.

The Institute for Supply Management-Chicago Inc. Friday said its business barometer increased to 43.4, the highest level since September, from 39.9 in June. Readings below 50 signal a contraction. If we don't see a significant uptick come Q3, you should be worried.
No one can denial a big jump in GDP from -5.5% to -1% ,but the unemployment and shadow inventories will slow down the rate of recovery. We are going to get a very sluggish recovery contradict to average investors believe, unless Obama's administration comes with the stimulate package (II) & (III) to fill up the lack of consumer consumption. I'm looking for a "W" shape recovery not "V" shape as many believe. I'm slightly less bearish, but I'm not going to call March low the bottom unless S&P500 takes out the 1200.

If you are new to my blog. I recommend to read my article "What is wrong with the US economy?"