"If you're prone to worry about where the economy's headed, last week's developments weren't very reassuring.
On Tuesday, the Bureau of Economic Analysis revised its estimate of third-quarter real GDP growth down from the initially reported 2.5% annual rate to a new figure of 2.0%. That revision in itself is not particularly scary, since it mostly came from the fact that inventories were drawn down even more than originally estimated-- real final sales still grew at a decent 3.6% annual rate for the third quarter. But more troubling is the fact that Tuesday's figures also gave us the first reading on an alternative measure of third-quarter GDP that is based on a calculation of the total income being earned. This measure, gross domestic income, is conceptually equivalent to GDP but indicated only 0.4% annual real growth for 2011:Q3. Fed economist Jeremy Nalewaik maintains that GDI can give a slightly better early warning of a business cycle turning point. One reasonable procedure is to go with the average of the GDI and GDP growth rates, which gives an anemic 1.2% annual real economic growth rate for the third quarter..."
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