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Q4 GDP, advance: +5.7% vs. +4.8% expected, +2.2% in Q3. Chain-weighted price index +0.6% vs....

Q4 GDP, advance: +5.7% vs. +4.8% expected, +2.2% in Q3. Chain-weighted price index +0.6% vs. +1.3% expected, +0.4% prior.
Comments (37)
  • herbert hoover
    , contributor
    Comments (2005) | Send Message
     
    SDS on sale today. Buy some for yourself.
    29 Jan 2010, 08:33 AM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    I would rather short your logic. You might have to change your handle to Jim Cramer or Larry Kudlow. To be fair, there isn't a whole lot of short term coorelation between GDP gains and market gains, but your logic does need explaination. Is it technically based or political delusion?
    29 Jan 2010, 08:59 AM Reply Like
  • youngman442002
    , contributor
    Comments (5131) | Send Message
     
    so the fed better have an emergency meeting and raise rates right away...right......NOT
    29 Jan 2010, 08:35 AM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    Why would they since the GDP price gauge climbed at a 0.6 percent annual pace? This below the Fed's long term forecast. Please tell me why a huge number in inventories build and capital expenditures is not good news.
    29 Jan 2010, 08:56 AM Reply Like
  • Myny
    , contributor
    Comments (28) | Send Message
     
    dont get too excited ppl. firts it will very likely get revised. second, i didnt have a chance to look at the numbers yet but im sure its pretty much inventories. third, who is gonna buy those inventories?
    29 Jan 2010, 08:38 AM Reply Like
  • Papaswamp
    , contributor
    Comments (2178) | Send Message
     
    The increase in real GDP in the fourth quarter primarily reflected positive contributions from
    private inventory investment, exports, and personal consumption expenditures . The change in real private inventories added 3.39 percentage points to the fourth-quarter change
    in real GDP after adding 0.69 percentage point to the third-quarter change.

     

    There had better be a pick up in demand or there will be a whiplash effect to the negative side next quarter.
    29 Jan 2010, 08:41 AM Reply Like
  • paultheprofit
    , contributor
    Comments (68) | Send Message
     
    g/jeez...ya'll...it's pretty EASY...gas went from 2.30 to 2.8 a gal...in 4th q...plus our gov.t had a trillion dollar shortfall...cause they spent...PLEASE...those TWO facts are POSTIVE..for...GDP

     

    puke/gag/NOT.............
    29 Jan 2010, 08:47 AM Reply Like
  • fed_alchemy
    , contributor
    Comments (245) | Send Message
     
    Just means everyone is on board for the Ponzi ride to Prosperity
    29 Jan 2010, 08:54 AM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    Please do not act as if you have a monopoly on wisdom. You did not read the report. The inventories and cap ex #'s were huge. These are private sector #'s. You are not as bright as you think.
    29 Jan 2010, 09:10 AM Reply Like
  • Tack
    , contributor
    Comments (12744) | Send Message
     
    "The change in real private inventories added 3.39 percentage points to the fourth-quarter change
    in real GDP after adding 0.69 percentage point to the third-quarter change. Private businesses decreased
    inventories $33.5 billion in the fourth quarter, following decreases of $139.2 billion in the third quarter
    and $160.2 billion in the second."

     

    The pressure continues to mount for future inventory replenishment, a positive sign.
    29 Jan 2010, 08:51 AM Reply Like
  • bfstrog
    , contributor
    Comments (71) | Send Message
     
    Inventory is a measure of uncertainty of demand. How are increasing inventories a good thing?

     

    That's like saying I have a huge Accounts Payable asset on my books but my customer is broke. Not good.

     

    With regards to jpiretti's snarky replies about rebuilding inventory before you rehire employees... companies are building inventories, which implies they are outproducing demand in Q4. Why do they need to hire additional employees under this circumstance?

     

    I have heard no mention of "cash for [consumer product that no one really needs]". And the homeowner stimulus bill, which is the biggest scam to redistribute wealth to low-cost housing I've ever seen. If there is no tax credit, housing prices drop, and I'm able to buy the house cheaper.. see?

     

    The main point is that the "demand" you are all espousing does not exist, and you need inventory depletion and production capabilities that are underutilized to begin re-hiring. Until I see that, this is all smoke-and-mirrors to me.
    29 Jan 2010, 11:21 AM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    You are incorrect. The previous Qt. inventories fell off the cliff. That represented uncertainty. The inventory build this month did not make up last Qt's shortfall, but represents the manufacturing sector's confidence in future sales. This is why the manufacturing sector has expanded for 6 straight months.
    29 Jan 2010, 03:19 PM Reply Like
  • bbro
    , contributor
    Comments (9322) | Send Message
     
    over the last 252 qtrs of economic activity (1947-2009) there have been negative inventories in 50 quarters.....we still have negative inventories this quarters which means businesses are still behind the curve on demand ( final sales).....
    29 Jan 2010, 08:53 AM Reply Like
  • mrdirt
    , contributor
    Comments (416) | Send Message
     
    If GDP increased so much, why arent companies hiring to meet demand? Why does the President want another stimulus (jobs bill)?
    or does GDP really stand for Government Dependent Prosperity?

     

    29 Jan 2010, 09:03 AM Reply Like
  • Tack
    , contributor
    Comments (12744) | Send Message
     
    The answer to this question is very simple. Businesses have been/are reluctant to expand production because they have been brainwashed by the constant media mantra that a "double dip" is inevitable and that recovery is "unsustainable."

     

    Consequently, demand continues to grow, and supply continues to fall. The inevitable result of this equation will be a belated explosion in production and/or increase in inflation, as improving demand meets inadequate supply.
    29 Jan 2010, 09:11 AM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    We were losing 750K jobs in Jan. 09' and last month lost 85K (after a gain of 4K in Nov.) What direction do you see? Companies rebuild inventories before they completely rebuild their labor force. This is why we have had historical gains in productivity.
    29 Jan 2010, 09:12 AM Reply Like
  • OptionManiac
    , contributor
    Comments (3304) | Send Message
     
    Agreed - local company may lose their biggest customer because they can not keep up with demand - had laid off too many people. I am hearing more of this.
    29 Jan 2010, 10:05 AM Reply Like
  • Ryu Mei Co
    , contributor
    Comments (222) | Send Message
     
    How I interpret the gdp number means nothing to the market. How the market interpret the gdp number means so much more for me to make money.

     

    Of course the gdp is questionable, but who really cares what I think. I will cover my short, take profit and dip buy like every one else. Get ready to fight another day.
    29 Jan 2010, 09:10 AM Reply Like
  • paultheprofit
    , contributor
    Comments (68) | Send Message
     
    Inventories...if building is positive...yeah right...consumer HAS NO DDISPOSABLE income now...if things were so good...inventory would BE FALLING...
    29 Jan 2010, 09:39 AM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    If you read the GDP reports, you will see how inventories fell off a cliff last Qt. The build that we saw this Qt. was huge, but it still has not made up last Qt's shortfall. The conclusion is we might have hit bottom and companies will need to rehire. This is confirmed in the 6 straight months in manufacturing growth and historical levels of productivity. Companies are getting as much as they can out of their labor force to rebuild inventories. Now they will need to rebuild their labor force.
    29 Jan 2010, 10:02 AM Reply Like
  • Poor Texan
    , contributor
    Comments (3529) | Send Message
     
    If they can rebuild their inventories to this level with their current labor force and it's sufficient for current demand, why hire? Especially if there is so much uncertainty about labor costs. I think the jury is still out.
    29 Jan 2010, 11:02 AM Reply Like
  • bfstrog
    , contributor
    Comments (71) | Send Message
     
    JP, you seem like a smart fellow, so you probably know how the fake demand brought on by federal stimuli can effectively shift capabilities and production to an earlier period at the expense of a later period. See - housing, cash for clunkers, personal debt, etc. Just because manufacturing is up doesn't necessarily bode well for the future.
    29 Jan 2010, 11:27 AM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    I am sure we will disagree on this, but in a recession of this magnitude, I do not believe in fake demand. If teachers, police and construction workers are keeping a job through federal pass-through dollars, that creates a multiplier effect. They spend those dollars in their communities and the 2nd derivative businesses now can keep payroll at levels that they would not be able to keep otherwise. To me this is like chemotherapy. The federal deficits will make you vomit and lose your hair in the short term, but you avoid the alternative of a economic death spiral...once we have stabilized (I think there is growing evidence of that) then you must address long term structural deficits...and with all due respect to all of those Reagan fans out there, that is where all of these problems start. I submit Debt/GDP charts to make my point. The only time we trended down in debt/GDP levels since 1981 is when we had pay-go in our budgeting. Unfortunately that got voted down just yesterday.
    en.wikipedia.org/wiki/...
    29 Jan 2010, 03:39 PM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    The answer is they can't. This why we have seen a steady improvement in the BLS monthly numbers over the last year (-750k to -85k). This improvement of course is not good enough to reduce the unemployment rate, only reduce the velocity of decline. The question is if firms are re-stocking inventories, do they believe in future increases in demand?
    30 Jan 2010, 12:19 PM Reply Like
  • Tack
    , contributor
    Comments (12744) | Send Message
     
    Maybe, the GDP report needs re-reading:

     

    " The change in real private inventories added 3.39 percentage points to the fourth-quarter change in real GDP after adding 0.69 percentage point to the third-quarter change. Private businesses decreased inventories $33.5 billion in the fourth quarter, following decreases of $139.2 billion in the third quarter
    and $160.2 billion in the second."

     

    The way I interpret the above is that even though companies may have expanded inventory building in Q4, the net result was insufficient to meet demand, so overall inventory levels contracted yet again, albeit at a "less-bad" rate, as they have done for months.

     

    Therefore, the "spring" of increasing demand and contracting supply gets wound tighter. Assuming this interpretation is correct, inevitably, there must be a major increase in supply (hiring) or we're going to embark on inflation, as demand further exceeds supplies.
    29 Jan 2010, 11:13 AM Reply Like
  • Papaswamp
    , contributor
    Comments (2178) | Send Message
     
    I disagree....I read it as simply a restocking. I see no signs of retail level increased demand. If anything it is continuing to taper off. PCE declined 0.8% from Q3. This worries me greatly...especially going into a rather slow/volatile (Q1 of any year) time. My hope is that things will indeed turn around...but the pessimistic side of me says no.

     

    Frankly, though many poopoo the idea, the high speed rail idea needs to go forward, but on a massive scale. Instead of $8 Billion...the administration should bump it to $800 Billion. I know people will blanch at this and my inner libertarian is in full revolt, but after seeing so many assessments including the CBO's forward assessment of the economy and jobs, this needs to be a depression like work program aiming to employ no fewer than 1 million for the next 3-4 yrs.. Certainly this would blow the federal budget up like a ballon (more so than it is)...but I see no alternative at this point. The previous govt. policies have set things on extremely fragile and uncertain grounds, instead of letting the blood be spilled when this down turn began.

     

    Hopefully, I am completely wrong...and growth really is occurring and not just govt. induced euphoria.
    29 Jan 2010, 02:52 PM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    One thing to consider with PCE is that it is as much a measurement of inflation as consumption. It takes into account the increases in price of a certain good/service in it's adjustment of consumption. If the price of gas goes up and the same level of dollars are spent on gas, the PCE will decline while a CPI measurement would remain constant. I do not teach this stuff, so if there is an economics teacher out there, please correct me where I am wrong.
    30 Jan 2010, 12:32 PM Reply Like
  • paultheprofit
    , contributor
    Comments (68) | Send Message
     
    ""•PCE slowed from 2.8% annualized growth in Q3 to 2.0% in Q4.""

     

    Tells you ALL you NEED to KNOW...the rest is..shall we say..."Liar's figure and figures lie""
    29 Jan 2010, 11:41 AM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    PCE is a measure of price changes in consumer goods and services. Why is it a concern of yours if inflation measurements decrease?
    29 Jan 2010, 05:03 PM Reply Like
  • paultheprofit
    , contributor
    Comments (68) | Send Message
     
    well Mr. Know-it-all...you REALLY think inflation went down...GAS went from 2.30 to 2.80...my insurance didn't go down...electric...food...

     

    Actually...it has NOTHING to do w/inflation...it's what J.Q. public spent...and they're SPENDING LESS....I go back to PREVIOUS point...less DISPOSABLE income...PERIOD...

     

    the WHOLE report WAS A BLATANT LIE...and the MARKET called it on the carpet...
    29 Jan 2010, 10:47 PM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    Take your conspiracy theories to the John Birch Society website. Here is the definition of PCE in Investopedia:
    "Similar to the Consumer Price Index (seekingalpha.com/symbo...), PCE is a report (actually a part of the personal income report) put out by the Bureau of Economic Analysis of the Department of Commerce. A measure of price changes in consumer goods and services.The PCEPI uses a chain index, which takes consumers' changing consumption due to prices into account; the CPI uses a fixed basket of goods with weightings that do not change over time. "
    Go be a jackass somewhere else.
    30 Jan 2010, 11:52 AM Reply Like
  • Papaswamp
    , contributor
    Comments (2178) | Send Message
     
    "Personal consumption expenditures consist of the actual and imputed expenditures of households; the measure includes data pertaining to durables, non-durables and services. It is essentially a measure of goods and services targeted toward individuals and consumed by individuals.
    Also referred to as "consumption.""

     

    Regardless of the way any of us interpret anything....consumer consumption should become 'plain as day' in Q1 2010...if that trend continues into Q2 then we can call a trend (good or bad). I know...we are all impatient to see a definitive sign one way or the other...hopefully we will get that sooner rather than later.....I'm betting bad, but hoping good.
    30 Jan 2010, 10:01 PM Reply Like
  • paultheprofit
    , contributor
    Comments (68) | Send Message
     
    Hat tip...market-ticker.org/

     

    The increase in real GDP in the fourth quarter primarily reflected positive contributions from private inventory investment, exports, and personal consumption expenditures (PCE).

     

    The first two are not a big surprise. The latter, however, is dangerous to rely on.

     

    As I have repeatedly pointed out we have over the last 18 months added about $500 billion (annually) in transfer payments to the federal budget. This counts in the GDP report as PCE, but is not actual output any more than I am richer if I go to the bank and borrow $20,000 on my credit card.

     

    If one was doing GDP as a "balance sheet" you’d have to subtract the addition in liabilities (debt) from the money spent, but of course GDP isn’t computed that way. This results in a nutty overstatement of GDP when it is used as a measurement of economic health, which of course is how all the so-called "economists" use it.

     

    Indeed, that $500 billion is an annualized distortion of a whopping 3.57% of the entire economy!

     

    Take YOUR head outta the sand and WAKE-UP...
    30 Jan 2010, 12:13 PM Reply Like
  • Tack
    , contributor
    Comments (12744) | Send Message
     
    The mistake that balance-sheet balancers make, when looking at transfer payments and other additions to the Federal balance sheet, is that they assume, like personal loans, that it all has to be paid back somehow. In fact, it's not intended to be paid back and will never be paid back. In that respect, those transfer payments are permanent "gifts" to recipients.

     

    One might ask, "how can they not need to be paid back?" The answer is that governmental balance sheets (not just the U.S.) are ever increasing, and as long as the economy expands, and the debt stays in some reasonable relationship to the GDP, the increasing governmental debts will never be paid back. They are serviced and become cheaper and cheaper over time as inflation does it inevitable thing.

     

    Economies are not closed systems, operating with finite resources (with apologies to the "we're-all-doomed" crowd). The whole always gets bigger and bigger, so it can support, within reason, expanding obligations. One might argue against transfer payments, based on political beliefs as to whether the government should be providing them, at all, to their chosen recipients (another discussion), but to suggest that they are merely temporary "loans" that must be paid back is to ignore how global fiat-currency-based economic systems work and have always worked.
    30 Jan 2010, 01:48 PM Reply Like
  • paultheprofit
    , contributor
    Comments (68) | Send Message
     
    Also...I'll admit my interpretation of CPE was WRONG...you WERE right...according to the way it's SUPPOSED to be figured...

     

    But btw Karl Denniger's take and this:

     

    So explain the DECREASE in so-called inflation...whilst in fact...things ARE GOING up???

     

    Do you also BELIEVE the Gov.t's claims of ONLY 10% un-employment???
    30 Jan 2010, 12:22 PM Reply Like
  • jpiretti
    , contributor
    Comments (710) | Send Message
     
    Inflation measurements are derivatives. If inflation goes from 3% to 2%, prices are still increasing, but at a slower rate. As far as the BLS figures of monthly changes and unemployment, I an always sceptical of birth/death and seasonal adjustments, but when I see Jan. BLS 2009 figures of -750k and Dec. 2010 figures of -85k (with +4k in Nov.) those adjustments can not distort the overall trend. I do not look at the unemployment rate. It is meaningless and a lagging indicator. I look at U6 figures or participation rates. With a recession of this magnitude, I would expect 5 years to make up what we lost from Nov. 2007 to Jan. 2009 (the worst of BLS monthly figures) I think it is fair to say we have a different philosophy on the role of government. I believe it would have been malpractice for the government not to have filled a portion of the the 10-15 trillion dollars lost in GDP that I primarily attribute to private sector negligence. I am not comfortable waiting for the private sector to straighten it out. Having said that I apologize for my previous bitter tone.
    30 Jan 2010, 12:37 PM Reply Like
  • paultheprofit
    , contributor
    Comments (68) | Send Message
     
    I threw gas on the fire...no need for that...will say...do believe both those nov./dec. figures were re-vised...lol's.
    30 Jan 2010, 02:32 PM Reply Like
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