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HomeSense on Cents Quiz: Average GDP from ’02-’12 Is . . ?
Posted by Larry Doyle on July 31st, 2013 10:53 AM |
The Bureau of Economic Analysis this morning released the 2nd quarter GDP report and it registered a surprisingly robust reading of 1.7%.
Not that a growth rate of 1.7% is anything to write home about but it was better than the forecasted growth rate of 1% or thereabouts.
The cynic in me tells me that I guess we are supposed to disregard the downward revision to the prior quarter’s growth from a reading of 1.8% to 1.1%. That fact only further confirms that our economy continues to largely walk in place with what I have long defined to be a case of “walking pneumonia.’ (more…)
What Does Bernanke Mean by ‘Transitory’?
Posted by Larry Doyle on April 28th, 2011 9:05 AM |
I encourage you to read this piece in its entirety. It is not overly long and we have a little fun at the end. Thanks. LD
Transitory.
I am now regularly hearing the use of this singular term by our chief central banker, economic pundits, media mavens, and assorted other public officials.
Transitory? What does it really mean?
Yesterday, the Federal Reserve utilized this term in the Fed’s official release:
Increases in the prices of energy and other commodities have pushed up inflation in recent months. The Committee expects these effects to be transitory, but it will pay close attention to the evolution of inflation and inflation expectations. (more…)
Economics: An Art or a Science? Checking in with Rick Davis of Consumer Metrics Institute
Posted by Larry Doyle on September 27th, 2010 7:21 AM |
The study of human behavior may be considered a science but to me it is the greatest and most challenging of arts. Why is that? For the very simple reason that while we are limited in the ability to study human behavior by reviewing the past, we are challenged by the fact that future behaviors are forever changing. The lessons of the past often do repeat themselves in the future; however, the environment of the PRESENT has NEVER truly been experienced so our current and future behaviors are so hard to forecast. Thus, is economics more art or science? Perhaps we can cover both bases and call it as much an art as a science especially in the Uncle Sam Economy circa 2010.
I raise this topic based upon a recent commentary put forth by a Sense on Cents favorite site, Consumer Metrics Institute. Rick Davis continues to paint an exquisite work as he recently penned, The Diverging GDP,
Prior to each revision to the GDP we are asked for insights into the likely course of those corrections from the Bureau of Economic Analysis (“BEA”) of the U.S. Department of Commerce. Most of the questions we have received recently center on the increasing divergence of our Daily Growth Index from the BEA’s GDP over the past couple of quarters: (more…)
GDP Revisions Make 2nd Quarter Report Suspect
Posted by Larry Doyle on July 30th, 2010 9:14 AM |
2nd quarter 2010 GDP was just released and registered growth of +2.4% versus consensus expectations of +2.6%. Slightly weaker than expected, and we can all move on perhaps? Not so fast.
1st quarter GDP was revised from its supposed final reading of +2.7% to a newly revised 3.7%!! So the economy was that much stronger in the 1st quarter than previously thought that the 2.4% 2nd quarter reading is actually not all that bad. Again, not so fast. Let’s continue to peel the onion a little further. (more…)
Continuing Consumer Contraction Points to Accelerating Double Dip
Posted by Larry Doyle on July 27th, 2010 6:10 AM |
2nd quarter earnings are certainly coming in stronger than expected, and our equity markets are having a solid rebound this month. Are these earnings reflective of real underlying strength in the economy or corporations that are now operating more efficiently?
Has our economy hit a soft patch? Is it declining? Are we rebounding from a recent downturn? Might we experience a real double dip?
The initial reading of 2nd quarter GDP is due this Friday. To say that it is highly anticipated would be a huge understatement. Consensus expectations for 2nd quarter GDP are running between +2.5% and +3%. Recall that the final 1st quarter report registered a +2.7% reading.
A Sense on Cents favorite has a decidedly different view of 2nd quarter economic activity and the subsequent GDP. (more…)
Wall Street Economist v. Rick Davis: Mano a Mano
Posted by Larry Doyle on July 1st, 2010 10:37 AM |
I love a good debate, or at the very least a healthy response to a challenging statement. I witnessed just such an exchange yesterday.
I shared my story, Rick Davis Nailed 1st Qtr 2010 GDP Report on November 30, 2009, with a noted Wall Street economist, with whom I am friendly and whom I hold in high regard. Recall that in the aformentioned story, I highlighted that Rick Davis of Consumer Metrics Institute is projecting a double dip recession with a 2nd Qtr 2010 GDP reading of -1.5% and a 3rd Qtr GDP reading of -2.0%.
In sharing that commentary with this well known economist, I received the following response: (more…)
Consumer Metrics Institute: Double Dip Mild, but Prolonged
Posted by Larry Doyle on May 27th, 2010 6:54 AM |
Is the economy slipping into a double dip or has it already slipped and we just need to wait a few months for the mainstream media to hopefully report on it?
Clearly, our domestic and global economies are very fluid and subject to serious fluctuations given the massive amount of government intervention, but where can we go to receive a real-time look at the economy?
Let’s review the work of Sense on Cents Hall of Famer Rick Davis of Consumer Metrics Institute. Recall that Rick and his colleagues capture and review a wealth of consumer retail data across ten sectors of our economy on a ‘real time’ basis. While analysts are downstream assessing developments with production, Rick and team are way upstream assessing what the consumers are doing NOW. Current consumer activity is highly correlated with GDP out 17-18 weeks. Yes, we are getting a sneak peek at next quarter’s GDP now. Amazing stuff.
What does Rick see and what does he project? Let’s navigate. (more…)
“Grossly Distorted Product” or “Christmas in July”
Posted by Larry Doyle on October 30th, 2009 9:10 AM |
What is the real economy doing? While yesterday’s GDP printed a surprisingly strong 3.5%, are we to take that on face value? If we care to most effectively navigate the economic landscape, we should dig a little deeper.
A full 2.2% of the 3.5% rise was directly correlated to Uncle Sam’s support of the auto and residential construction sectors of the economy. Another .6% of the GDP was directly correlated to federal spending. Obviously, the Uncle Sam economy implies a large presence by that jolly old man. However, all that money Sam is pumping is nothing more than borrowing from future generations and pulling demand forward.
What would the economy have done on its own without the government support? Let’s listen to Christina Romer. Recall that Ms. Romer referenced last week that this quarter would provide the peak impact of benefits accruing from Uncle Sam’s economic stimulus. What does she say about this GDP report? The Wall Street Journal references Ms. Romer in writing, Economy Snaps Long Slump:
Without stimulus programs such as “cash for clunkers” and a first-time homebuyer’s credit, “real GDP would have risen little, if at all, this past quarter,” Christina Romer, president of the White House Council of Economic Advisers, said in a statement.
Why does Ms. Romer provide that sobering view of the economy? Very simply, if the American consumer represents 70% of the economy, then we should largely focus on that consumer. What did we learn about the consumer over the last quarter?
The Financial Times’ John Auther informs us in writing, Short View: GDP Grows, but Pain Remains:
Household disposable incomes actually fell during the quarter, by 3.4 per cent, but consumer spending rose, also by 3.4 per cent. This is not a pattern that can be sustained for long, and it is inconsistent with the need for US families to pay down their debts.
What does that disparity between income and spending represent? An unsustainable economic path. What else does it mean? The U.S. economy just had “Christmas in July.”
Did you get anything in your stocking?
LD
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The Taxman Cometh
Posted by Larry Doyle on June 17th, 2009 7:07 AM |
How often during the campaign did we hear President Obama highlight that taxes would only increase for those earning incomes within the top 5%? You didn’t actually believe him, did you?
Yesterday, Obama played pure politics in backtracking from that “promise.” In an interview with Bloomberg, Obama Sees 10% Unemployment Rate, Chides Wall Street Critics:
He left open the possibility he would have to raise taxes on most Americans to decrease the deficit if growth were too weak. He also indicated he might tax the most-expensive employer-provided benefits to help pay for his health-care revamp. Both would reverse pledges he made during the campaign.
“If we are growing at a robust rate, then we can pay for the government that we need without having to raise taxes,” Obama said. “If we’ve got anemic growth, if we don’t have a strategy for recovery without bubbles, which is essentially what we’ve had over the last couple of recovery cycles, then we’re going to continue to have problems.”
What are Obama’s projections for unemployment and GDP?
Unemployment: 8.1% average in 2009, 7.9% average in 2010
GDP: -1.2% in 2009, 3.2% in 2010, 4% in 2011, 4.6% in 2012
No respected economist or analyst believes these numbers are credible. If anything, projections are only getting worse on both fronts. Obama, in a face saving move yesterday, admitted we will see 10% unemployment this year.
In regard to GDP, perhaps Obama should speak with Mohamed El-Erian at Pimco about the “New Normal” growth rate of 1% to 2% in the Brave New World of the Uncle Sam Economy.
What does it all mean?
The Taxman Cometh!!
LD
Dead Cat Bounce
Posted by Larry Doyle on March 4th, 2009 3:00 PM |
The equity markets are up almost 3% today. Did we just put in a bottom? Can we at long last expect better price performance? Are we seeing a turnaround in the economy? Well, in Wall Street parlance today’s price action is known as a “dead cat bounce.” I had mentioned a day or two ago that a short term RSI (relative strength index) had fallen below 30%. Anytime that index gets that low, the market is susceptible to a bounce to force some short covering.
The Federal Reserve released a report, known as the Beige Book, and highlighted that they expect No Turnaround Soon in the economy.
Additionally, even though the major market averages are up 3%, why is it that the major capital providers are down significantly on the day? Look at the price changes for the following: (more…)
