White House Sees Bleak Q4

In a special, Tuesday, pre-holiday press conference, White House spokesman Tony Fratto shared the Bush administration's economic outlook in light of today's 0.5% Q3 GDP contraction.

Q: GDP third quarter shrank 0.5 percent. What is the outlook beyond that? Is that the worst of it, or is it going to just get worse?

MR. FRATTO: Well, of course, that's looking backwards, and it's certainly not the worst of it. That was for the months -- the late summer, early fall months were the third quarter. And that was a quarter where we definitely saw a significant slowing in the economy. The economy in the previous quarter, in the second quarter, had grown at about 3 percent, which is fairly healthy. And we saw the economy slow down that quarter. We also saw impacts from the hurricanes that hit the southern part of the United States, the impact of the Boeing strike. In effect, I think our estimates from the Council of Economic Advisers estimates that that -- those two events, the hurricanes and the Boeing strike combined probably knocked about a full percentage point off of GDP. So we may have seen positive growth in that quarter were it not for those events.

That's the third quarter. The fourth quarter we know, because of the credit crisis, the standstill in credit as markets froze up, and the financial market turmoil, will be significantly weaker. I think you have private sector forecasts out there that -- you can look up the ranges for what they're estimating. But there's absolutely no question the fourth quarter is going to be a very weak quarter. We see that already in the monthly payroll data that has been reported already.

So it's a tough quarter, there's no question about it. What we've been focused on is implementing the financial rescue package and the efforts of the Fed to restore growth, to free up credit so that the economy can return to more normal practices and get healthy again. And that's the most important thing we can do right now.

Comments

[herbert hoover:]

My guess is a little over 5% but they will massage the figures to about 4.8. The real number won't come out until the revisions are made

2008 Dec 23 05:08 PM

[jepittman:]

Since when do we look to the WHITE HOUSE as a leading indicator????

2008 Dec 23 07:54 PM

[Moon Kil Woong:]

The summation at the end is the biggest reason why this administration is failing."What we've been focused on is implementing the financial rescue package and the efforts of the Fed to restore growth, to free up credit so that the economy can return to more normal practices and get healthy again. And that's the most important thing we can do right now."

Freeing up credit does nothing when there is de-leveraging and the appetite for borrowing is dropping. Furthermore job losses are accelerating and bank losses are mounting. A complete lack of economic understanding is occurring. Dumping money into the economy does not necessarily stimulate growth although it can stimulate inflation if overdone. Real economic contraction occurs through a drop in goods and services produced. The effect of decreasing money supply is a result of that fact. Increasing money supply without a corresponding decrease in assets leads down a inflationary recession not out of a recession.

Stopping the flow of layoffs, increasing demand our of more efficient production/lower prices, increasing demand for new products with new technology (computers, Internet, biotech, medical advancements, etc.), and creating stability through assurances your economic future is safe is a way to revitalize the economy. It is not by having a bank lottery every week, bailout the bad company quarterly givaway, and promoting instability through an erratic Fed and Treasury policy.

Although direct infusions of assets into banks gives you more bang for your buck, when Paulson sold TARP to the public he essentially lied. If you are a little more forgiving you could say he didn't keep his word. Either way, they are promoting erratic behavior and contributing to instability. They are the contributing to the cause of a collapse not really helping.

Anyway, since it's the festive season, let's hope for a better 2009 since we are getting a lump of coal this year.

2008 Dec 24 01:10 AM