2Q GDP Report: Please Hold Your Applause

President Obama's economic advisers are trying hard to give the 2Q 2009 GDP results the best possible spin. The headline numbers point to an improvement, but a closer look shows that the economy we have all come to know and love is still very weak, and more may be coming. There is one bright spot for consumer spending, however -- surrounding Wall Street.

"We were in a nosedive six months ago, but there's none of that now," said Economic Council Director Larry Summers on NBC's Meet The Press Sunday.

But look at the major components of GDP, and their contributions to second-quarter results (click on the graphic to see it full size):

Business investment is still down considerably, and personal consumption, which makes up 70 percent of the U.S. economy, returned to negative territory in the second quarter. The contributions of net exports are positive, but that's misleading, because the gain there came from shrinking imports, rather than real export growth. (And the reason for shrinking imports? Falling demand.)

The only component making any real progress is government, which contributed 1.1 percent growth to the quarter's one percent decline. In dollar terms, the annual rate of government spending rose 1.5 percent from 1Q to 2Q 2009. But the lion's share of that spending was on defense, not stimulus.

Here's a more detailed analysis from Bill King, via The King Report. Put on your thinking caps:

We feel compelled to address the scheme of 'past month lower revisions producing better than expected m/m or q/q results' even though the aggregate metric is worse than expected. We have incessantly noted and commented on this scam but most of the trading & investing universe elides it.

We will again utilize basic math to illustrate the scam. If Q4 08 GDP was 100 units, and Q1 09 was reported at -5.5% and Q2 09 GDP was expected to be -1.5%, the expectation was for GDP of 100 units minus 5.5% or 94.5 units, minus 1.5% or 93.08 units.

With the revision of Q1 09 GDP to -6.4% the Q1 GDP units become 100 minus 6.4% or 93.6 units. So Q2 is minus 1% or 92.664. Ergo aggregate GDP was worse than expected!!!!

As we warned, lower imports, a sign of economic weakness, contributed a net 1.4% to GDP.

Once again beancounters 'fooled' with inflation to produce higher GDP than warranted.

In normal times, unemployment benefits last 26 months in most states. Congress has already extended the insurance once, and Representative Jim McDermott, Democrat of Washington and chairman of the House Subcommittee on Income Security and Family Support, plans to seek further legislation, for 13 more weeks of benefits, for workers in states that are harder hit.

Meanwhile, at Delmonico's, the ancient expense account steakhouse a block off Wall Street, business is picking up, reports Bloomberg. A table of high rollers splashed out for a $4,000 bottle of wine, the first such since January.

The restaurant, which used to sell about 10 four-figure bottles a week before last September, has sold that many since June, [said Delmonico's managing partner Dennis Turcinovic].

Under the circumstances, the return to excess may not be all bad: every new securities industry job tends to create three additional jobs -- two in the city and one in the suburbs, says the office of the NY State Comptroller.