Friday, April 26, 2013

Thoughts on GDP

First a recommendation.  For those who haven't yet Comerica has a free email distribution with some of the best and most spin free macroeconomic analysis available.  They also have a blog

First quarter 2013 GDP came in at 2.5%.  Decent sounding headline number until...  Until you look at where it came from.  Fully 1% was merely rebuilding inventory from Q4 '12 and the Sandy effects.  Yup, a weather event last November accounted for 40% of GDP improvement.  Then the rest; consumer spending despite a steep downdraft in disposable income.  And recall; that drop in disposable income does not include the 2% FICA restoration.

By now hopefully you've visited Comerica and read their take.  One notable comment:

...there is also the clear drag from fiscal tightening. The parts
in the first quarter GDP report are indicative of an economy that remains hobbled and is not well poised to
accelerate into mid‐year. In the current second quarter growth in consumer spending will be cooler. We will
likely see another, but smaller, gain from inventories. Government spending will continue to contract.

There's the trap.  Government spending$2 billion more per day than they collect instead of the previous $3 billion more per day is a "bad" thing for GDP measures.

Observations anyone? 


Cinco-X said...

Demand is an issue, whether it's consumer demand or investment demand(except for real estate, which always goes up)... the belief that government came make up for flaccid consumer demand only works for small signal disturbances...we're way past that now...

Rob Dawg said...

One indicator of "demand" is the 10 year US Treasury Bond. Currently 1.66 which is again approaching modern historical lows. Methinks the GDP isn't telling us some things.

Son of Brock Landers said...

I work in employee benefits and have data on many different industries. Not seeing head count growth anywhere outside of energy and ancillary energy service sector groups.