Flatlining GDP & NFP

Friday, June 01, 2007 | 07:38 AM

As much as I typically like to discuss NFP on the first Friday of each month, I find myself unable to muster the usual blather. Not because the initial data is near garbage, subject to massive revision, and wildly off from reality -- that's a given.

No, today I find myself unable to get enthused about NFP because I am still reeling from the horrific GDP data we got yesterday.

Gdp_wsj_20070531 Yesterday we learned that in Q1 2007, the economy expanded at the near zero growth pace of 0.15%. That's practically flatlined. This was the worst reading since a 0.2% increase in Q4 of 2002.

What's that, you ask? In the media, GDP was reported at 0.6% you say? Um, no -- that's the annualized rate -- take Q1 GDP and go mulitple it 4X and THAT's how you get to a still pitiful 0.6%.

The sunshine crowd bamboozled the press on this big time. Articles such as this one: U.S. Economy: First Quarter May Have Been Low Point -- report conjecture as fact and completely ignore what the actual data is. The WSJ was no better:  Slow Growth May Presage Pickup.

Or not. 

Here are the facts: The U.S. economy grew last quarter at the slowest pace in more than four years. The initial GDP report of 1.3% was actually more than double twhat the updated data showed, and was 25% below economists consensus. Housing, slack capex investment, declining consumer activity all are responsible for part of the slowdown.

Meanwhile in Europe, Business Investment has picked up dramatically. Europe's economy is growing about 4X the rate of the US in Q1.

Also included in the Commerce Department Data was that consumer spending was revised upward, to 4.4% from 3.8%. Note that if not for this revision, we would be talking about a sub 0% GDP. That would be the first quarter of 2 needed for the official measure of a recession.

How is it possible that consumer spending rose, when 80% of retailers have been missing numbers? Easy: Rising prices (not sales) in food and energy. You know, those elements the Fed hates to measure when it comes to inflation.

How and why most economists think that this is the low point is simply beyond me.


U.S. Economy: First Quarter May Have Been Low Point

Shobhana Chandra
Bloomberg, May 31, 2007

Europe's Economy Grows 0.6%, Led by Investment Surge
Fergal O'Brien
Bloomberg, June 1 2007

Slow Growth May Presage Pickup
Thinned-Out Inventories Mean More Output Ahead; Consumers Propel Economy
WSJ, June 1, 2007; Page A2

Friday, June 01, 2007 | 07:38 AM | Permalink | Comments (91) | TrackBack (1)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post



TrackBack URL for this entry:

Listed below are links to weblogs that reference Flatlining GDP & NFP:

» Don't worry, be happy from Econbrowser
Yesterday the Bureau of Economic Analysis told us that first-quarter real GDP grew not at the anemic 1.3% annual growth rate as was originally reported in the "advance" es... [Read More]

Tracked on Jun 1, 2007 12:47:51 PM


Thanks for your commentary it is greatly respected and appreciated.
My response was WTF to those same headlines. Am following the ball until the trend changes. Have a feeling that when fear returns the weak hands will end up with soiled pants. Have a great weekend!

Posted by: Don | Jun 1, 2007 7:49:01 AM

The comments to this entry are closed.

Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      


Complete Archives List



Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:

Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo



Odds & Ends

Site by Moxie Design Studios™