The GDP report: Moderately bad, perhaps more than moderately misleading
We finally got another quarter of negative GDP--the first since a year ago. The third-quarter number (-0.3%) will be revised as more data come in over the next couple of months, though, and economist Roger Kubarych of Italo-German superbank Unicredit (whose analysis was the first to land in my e-mail inbox) actually thinks it may go up.
But Kubarych is sure the fourth quarter will be bad bad bad, as is everyone else in economistland. Maury Harris at UBS predicts the economy will shrink at a 3.5% annualized pace in the fourth quarter.
Some numbers from today's GDP report show why:
consumer spending, down at a 3.1% annualized pace (adjusted for inflation)
consumer spending on durable goods, down 14.1%
capital spending (nonresidential fixed investment), down 5.1%
disposable personal income, down 8.7%
What was up? Federal government spending, up 13.8%! Although most of that was due to a big gain in defense spending. Nondefense spending was up at only a 4.8% annual pace. That should change in the next coming quarters.
Oh, and after my post on the saving rate yesterday I should note that it is down, to 1.3%, from 2.7% in the second quarter.
Finally, it should be noted that you may want to ignore all the above numbers (except the savings rate, which is calculated using non-inflation-adjusted numbers) because they're so tainted by the difficulty the government has been having in measuring inflation this year. As Kubarych's colleague Harm Bandholz (I did not call Unicredit a superbank for nothing) explains:
According to the BEA, personal consumption expenditures for food subtracted an annualized 0.89pp from GDP growth (!) - that is the second largest subtraction since 1950 and is more than the 0.80pp drag from private consumption! We think that this odd figure was likely caused by flawed deflators. As nominal spending for food decreased an annualized 0.9%, the deflator for food expenditures soared another 7-3/4%.
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1
You can safely ignore the savings number as well. Sales of fireproof safes indicate that more Americans are willing to trust their luck with burglars than with banks.
I have moved my savings from a bank to the mattress as well.
Savings, I suspect are doing well, but they won't be reflected in government figures.
Spud
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2
You can safely ignore the savings number as well. Sales of fireproof safes indicate that more Americans are willing to trust their luck with burglars than with banks.
I have moved my savings from a bank to the mattress as well.
Savings, I suspect, are doing well. They won't necessarily be reflected in government figures.
Spud
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3
Great by taking your money out of the economic flow you are effectively crippling our economy! Thanks.
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4
No Greenspan already pulled a Tonya Harding on the economy. Spud is just protecting his other knee cap!
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5
When will stock markets hit bottom? At this chaotic moment, no one can really tell.
For the past few weeks, the world financial institutions are in great turmoil, encapsulated in fear, panic, directionless and perhaps worst of all ignorance.
No body exactly knows what has been happening. The economists, regulators and the financers who are always seemingly in the know have been stunned by the absolutely gargantuan magnitude of the crisis. No one is offering any tangible help, let alone a workable solution.
In short, capitalism has seen its glorious days for more than one and a half century. It is time to sit down and make serious evaluation. Perhaps a new paradigm or a fresh economic order is needed. If so, the world nations (rich and poor) should orchestrate and act quickly for an amiable solution.
(Tan Boon Tee, btt1943@yahoo.com) -
6
are the two wars responsible for USA s economic downturn yes absolutely the sooner you roll back the better it would be specially the afghan war is a no result fight as afghans are known for their ferocity they are either fighting one or preparing for one
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