GDP looking good
People often ask me why the stock market rises when the economy is down. As in last year, from March 10 through the end of the year. It was a constant question.
I don't know why the flip of that situation doesn't seem to worry folks. No one ever seems to ask me why the market is down, about 2 percent for January as I write this, while the economy is up, as the Commerce Department reported this morning. GDP zoomed at a 5.7 percent annual growth rate in the fourth quarter, the fastest pace since 2003. That followed a 2.2 percent growth rate in the third quarter.
Maybe it's because they don't believe the economy is up.
Six months of economic growth makes this really look like the end of a recession. It's the textbook definition. That didn't stop the debate the other day in the newsroom over whether it was really over. The numbers say so, even if it doesn't feel so.
Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.
Comments
GDP: There's Your Inventory Bounce
The increase in real GDP in the fourth quarter primarily reflected positive contributions from private inventory investment, exports, and personal consumption expenditures (PCE).
The revisions to this report should be interesting. Remember that the last quarterly GDP report was revised downward some forty percent over time. I've archived this copy privately on The Market Ticker so as to preserve any "accidents" in this regard.
Bottom line: The market liked it (although the net change after thinking about it for a while was pretty much a non-event - we're up a whole two S&P points a half-hour after release) but most of the improvement was due to inventory build and transfer payments from the government (and the government borrowed the money), not actual earned personal income.
http://tinyurl.com/y9pcadr
Posted by: paul | January 29, 2010 12:39 PM
Roubini, Summers and Obama
Roubini said more than half of the growth was related to a replenishing of depleted inventories and that consumption was reliant on monetary and fiscal stimulus. As these forces ebb, the rate will slow to 1.5 percent in the second half of 2010.
No really? We've embedded $500 billion in annual transfer payments of various forms over the last 18 months. That's about 3% of GDP, or more than the "advance" GDP number says that personal consumption expanded (2.2%)
In other words, but for the additions to transfer payments over what was present before we went into this mess consumption would be printing a solid negative number - still.
http://tinyurl.com/y8hb5zl
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