Bemused by GDP Figures 28 comments
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The GDP figure came in better than expected this morning. Who in their right mind would think that Jan Hatzius and the boys at Goldman could be so wrong? Perhaps they aren’t infallible after all? The headline number came in at 3.5% which was better than the 3% consensus. The bounce in GDP largely reflected the stimulus boost and cash for clunkers, but there were also some encouraging signs in the data. Cash for clunkers added about 1.66% to the data, but PCEs and investment were better than expected. Econoday reports:
PCEs rose an annualized 3.4 percent, led by durables with a 22.3 percent jump. Residential investment made a partial rebound of 23.4 percent-the first gain since a 2.6 percent rise in the second quarter of 2006.
The GDP price index was in at 0.8% and continues to reflect the low inflationary environment. Despite the big miss by Goldman Sachs’ Hatzius he continues to turn a bit more negative on his overall outlook. In a recent note he says the real economy is probably weaker than the stock market represents:
Beyond the near-term “bean count,” our broader call for a sluggish recovery with falling inflation and continued low interest rates remains unchanged. It is based on two considerations. First, the overall economy is probably weaker at present than suggested by many standard indicators and the strength in the equity market because smaller companies—which are underrepresented in standard indicators and are not publicly traded—are underperforming larger ones. Hence, there is a significant chance that growth in the second half of 2009 will be revised down from whatever preliminary estimates the government statisticians publish over the next few months, once more complete source data become
available.
He is also growing increasingly concerned about the end of the fiscal stimulus. He expects the headwinds from the labor market, consumer deleveraging, excess housing supply and state and local budget cutbacks to weigh on the markets:
Second, the economy will lose the benefit of the fiscal stimulus and the inventory cycle over the next year. We estimate that these factors are worth a total of 4 percentage points in terms of the impact on annualized real GDP growth in the second half of 2009. If our estimate is correct, growth will slow over the next year unless underlying final demand growth—“organic” growth, if you will—picks up by 4 percentage points or more. While some improvement in organic growth is likely, we expect it to fall well short of 4 percentage points given the continued headwinds from the weakness in the labor market, consumer deleveraging, excess housing supply, and state and local budget cutbacks.
On the jobs front we continue to see extraordinarily high jobless claims data. This morning's figure came in at 530K with continuing claims falling 148K to 5.8MM.
All in all, the data should be strong enough to provide a near-term lift to equities, but does little to replace our thesis that the economic recovery has been largely built on stimulus as opposed to organic growth. I think Hatzius will ultimately look more prescient than he did this morning. This recovery will continue to be below trend and 2010 is shaping up to be quite a disappointment.
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On Oct 29 01:57 PM bbro wrote:
> More people will be employed next year, housing inventory will be
> lower, businesses will be forced to increase some spending,and<br/>...
> huge inventory gap will be narrowed....
Well thanks for that statement. I believe complete stranger's posts. Especially when they offer nothing to back up their statement.
On Oct 29 01:57 PM bbro wrote:
> More people will be employed next year, housing inventory will be
> lower, businesses will be forced to increase some spending,and<br/>...
> huge inventory gap will be narrowed....
On Oct 29 03:21 PM epeon wrote:
> Sure doesn't seem like happy days to me. I live in Houston and we
> are just getting by. The big engineering firms talk about new projects,
> but they keep getting delayed. I just don't see a turnaround here,
> yet.
Those contracts have moved to Chicago my friend, where the Council for the Ultimate Nothingness Todate (any significance in the 4 letter acronym derived therefrom is purely coincidental) has determined that "a strategic redirection of public funds was both appropriate and for the GREATER GOOD".
On Oct 29 04:07 PM MikeD71 wrote:
> Bartender, I'll have whatever he's having. Then take me out back
> and beat me senseless...
On Oct 29 01:57 PM bbro wrote:
> More people will be employed next year, housing inventory will be
> lower, businesses will be forced to increase some spending,and<br/>...
> huge inventory gap will be narrowed....
These events of significance will be followed in short order by discovery of the clean end of a turd in a D.C. neighborhood.
Should we cheer that commodities cost 10-20% more than 2008, our dollar fell 12%, and domestic revenue is down but somewhat offset by higher revenue in dollar terms overseas thanks to dollar depreciation? I still don't get it. Is destroying our asset value really worth pulling a single number into positives just so you can claim the recession ended? Commenters are right, this is a technical end to a recession and indicates nothing whatsoever about real recovery.
On Oct 29 01:57 PM bbro wrote:
> More people will be employed next year, housing inventory will be
> lower, businesses will be forced to increase some spending,and<br/>...
> huge inventory gap will be narrowed....
whats their next play I wonder.
a brief continued rise for a few more days followed by another drop,BUT holding at the recent bottom, to form a 'double bottom' and the illusion of a strong base for the sheeple to go all in.... if not next week, then a few weeks later ...however long it takes to engineer the right waves and trendline.
Hate to spoil your party, but the GDP figures are real . Any way you wish to spin it , the economy in the US expanded by approximately $500 billion in the last quarter. I am not sure what the exact monetary value of government spending contributed to this figure, but I would imagine it wouldn't even equate to 1/10th.
The media of course will continue to grab at headlines while the masses devour it.
On Oct 29 04:19 PM GotLife wrote:
> Just caught a sobering stat from a Fox Business guest. GDP would
> have to run 5% a year for three years for us just to get back to
> where we were before the crash.
On Oct 29 03:43 PM Stez wrote:
> As David Rosenberg pointed out the OECD survey states that the stimulus
> increased GDP by 5%. Work out the sums from there when looking at
> GDP.
>
> We have the PMI figures tomorrow and the ISM index Monday.
>
> They will provide the initial spur for either a rally back and over
> the previous high or a continuation of the fade.
>
> Today was a snap back from short term oversold conditions.
>
> The other problem is that the volume in the market has been falling
> from the last four to five months. We need a substantial increase
> in volume to smash forward.
>
> The question is there this much vaunted cash waiting on the sidelines?
> Or as the volume decrease shows has it been allocated and now reaped?
On Oct 29 01:57 PM bbro wrote:
> More people will be employed next year, housing inventory will be
> lower, businesses will be forced to increase some spending,and<br/>...
> huge inventory gap will be narrowed....
On Oct 29 04:19 PM GotLife wrote:
> Just caught a sobering stat from a Fox Business guest. GDP would
> have to run 5% a year for three years for us just to get back to
> where we were before the crash.
Just how do 4 quarters of negative growth equate to 12 quarters of positive growth? Please explain this to me as I would love to know.
The acceptable rate of job losses in the US during a period of normal economic activity is around 200,000 - 300,000 per month. Presently it's a little higher at 500,000 , hence the elevated unemployment rate.
Despite all of the garbage distributed through the media, the US has an annualized GDP of $ 14.3 trillion (source: www.bea.gov/national/t... ) The same as it was in 2007 believe it or not.
Now I hate to break this to you, but it's the reason why a country experiences negative growth - people lose their jobs and spend less money during a recession.
If the US economy grew at an annual rate of 5% then you would have a record level of GDP valued at (wait for it) $16.55 trillion. This would mean that the US would overtake the Eurozone as the largest industrialized economy in the world. Even if the economy grew at 5% for 1 year GDP would still expand to $15 trillion, surpassing Q3 2008 which was $14.5 trillion.
Again it's a case of lies, lies, and more damn lies.
That is actually pretty scary because most of the growth is coming in autos and housing both of which are heavily subsidized. The problem with both of these is that they both encourage leverage. Leverage is pulling demand forward. So we sell cars this year at the expense of selling cars next year. Great for politicians, but bad for the economy.
Next year, people, including the government which is us, are going to have more interest to pay. That debt service is going to slow spending in the future. But do politicians care not really. They want to get re-elected and worry about the problems later.