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Yet Another Bitter GDP Disappointment

Visible to everyone except for the White House and a pair of AP reporters.

by
Tom Blumer

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April 30, 2013 - 12:11 am
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After a nightmarish fourth quarter of 2012, during which the economy was at first thought to have contracted to a tiny extent but finally eked out dismal annualized growth of 0.4 percent after revisions, President Barack Obama and his administration appeared to believe that they would have something to crow about when Friday’s report on first-quarter growth went public.

Too bad, so sad, guys.

Early that morning over at the Associated Press, aka the Administration’s Press, lead apparatchik Martin Crutsinger, informally nominated as the nation’s “Worst Economics Writer” by National Review’s Kevin Williamson (he could have added “by miles”), could hardly wait for 8:30 to arrive:

U.S. economic growth likely accelerated from January through March from a near-stall at the end of 2012, propelled by a revival in housing, steady consumer spending and increased stockpiling by businesses.

… Economists predict that the overall economy grew at an annual rate of 3.1 percent in the January-March quarter…

… A 3.1 percent growth rate would match the robust pace of the July-September quarter last year.

Really, this is the same guy who in 1987 characterized current and projected economic growth of between 2 percent and 3 percent as “weak.” In Marty’s 2013 world, anticipated growth only one-tenth of a point higher is now “robust.” It’s more than a little obvious that Crutsinger’s characterizations heavily depend on which party occupies the White House.

It must have been painful once Crutsinger or one of his AP coworkers disappeared into a government-administered lock-up room where a few privileged media organizations get 30-60 minutes of advance access I believe they shouldn’t have to information otherwise embargoed from release. It turns out that the first estimate of first-quarter growth in gross domestic product (GDP) from Uncle Sam’s Bureau of Economic Analysis was only an annualized 2.5 percent. Contrarian blog Zero Hedge noted that this was the biggest miss against analysts’ expectations since September 2011.

Well, 2.5 percent is a lot better than 0.4, right? Not really in this instance. The administration and its press acolytes tried to wave off the horrid fourth quarter as being caused by one-time items such as a sharp reduction in business inventories, and promised that things would even out with a big turnaround in early 2013. The average of the past two quarters is a paltry 1.45 percent. Big whoop.

The first-quarter expansion which did occur was driven primarily by a higher-than-expected 3.2 percent increase in personal consumption expenditures, which made up 2.24 points, or almost 90 percent, of reported growth. Given the drop in March retail sales and flagging consumer confidence, this GDP element seems overstated and likely to be revised down in May and June. Business investment beyond the inventory build-up only added .23 points to GDP growth.

It is true that about 40 percent, or 1.03 points, of the first-quarter gain was indeed due to inventory building. But the closer you look, the more troubling it gets. An astonishing and hugely disproportionate three-quarters of that inventory change — 0.78 points — occurred in farm inventories, a sector that is less than one percent of the entire economy. That’s by far this item’s largest contribution to GDP going back to at least 2004, and is enough to make one wonder how much crop value is rotting in the nation’s fields and warehouses. Imports also grew by much more than exports, subtracting a half-point from GDP.

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Top Rated Comments   
"“Gone are the fears that the economy could fall into another recession.”"

Replaced by the realization that we never left the last recession.
50 weeks ago
50 weeks ago Link To Comment
All Comments   (13)
All Comments   (13)
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On real issues and substance Marc we could probably agree on many things. :)
50 weeks ago
50 weeks ago Link To Comment
:)
50 weeks ago
50 weeks ago Link To Comment
Remember guys, this is the AP we're talking about. Are we sure they weren't hacked again?
50 weeks ago
50 weeks ago Link To Comment
I don't trust everything that AP releases.Often I question things they do give the public.Most mainstream media is so slanted&pro Obama 100%.Liz
50 weeks ago
50 weeks ago Link To Comment
"“Gone are the fears that the economy could fall into another recession.”"

Replaced by the realization that we never left the last recession.
50 weeks ago
50 weeks ago Link To Comment
The media are really no longer just cheerleaders for this administration, they are co-conspirators.

Stories about the unemployed, the street people? They only emerge in Republican administrations. The only place you will find the latest economic data given any play is in the business press.

The Benghazi matter has been deep-sixed in the press and the Boston bombing is on its way, but presidential speeches on gun control are heralded as wondrous to hear while the actual legislation falls flat in Congress.

There are countless other examples. What I wonder is whether is is precise to call this government a democracy anymore.
50 weeks ago
50 weeks ago Link To Comment
And all of this "growth" while the Fed keeps pumping dollars into the economy. That is the #1 reason the stock market is rising. It is also the #1 reason we can expect significant inflation by mid-to-late 2013.
50 weeks ago
50 weeks ago Link To Comment
I used to trade on the market,and when this house of cards collapses I'll be at the bottom ready to buy!
50 weeks ago
50 weeks ago Link To Comment
Hello Japan.Any ideas,we're stuck in the mud.
What i don't understand is how the market keeps moving up.Socialist governments (that now includes the US) all must stay out of the fast lane.I don't understand this card game but i just heard that the local market just got rid of their American workers and replaced them with illegal aliens.They live quietly, (a dozen to an apartment) and have a van.Could this represent the finger on the scale?
I consider that shrinking employment.
50 weeks ago
50 weeks ago Link To Comment
The stock market keeps going up because all the liquidity the FED injects must go somewhere and there are no other liquid alternatives. Deflation is hanging over us like the Sword of Damocles and all the CB's are doing everything they can to fend it off. Listen to CNBC for a while and you will see that almost everybody in this market knows it is not real but knows it is the only game in town. There are lots of funds that cannot sit in cash as you are apparently doing. No doubt some believe they will be nimble enough to avoid the crash, SOME of them will.

For Democrats, they are doing what their constituents want - inflating (or trying to). "Growth" oriented Republicans want the same, just with different beneficiaries. I think almost all politicians fear (with good reason) that the Republic will not survive deflation, so they are not going to buck the FED.

Anybody with hard cash that plays significantly in this market is brave indeed, but anyone who does not play to some extent is just surrendering to the erosion of inflation.

The market will continue to go up until some exogenous event derails it because the CB's will continue to inject liquidity. The alternative is too horrible.
50 weeks ago
50 weeks ago Link To Comment
Thanks,the only sure thing is that reality rules.Atlas just told me that this european fiction will not hold up!
50 weeks ago
50 weeks ago Link To Comment
GDP and domestic consumption are grossly flawed measures to begin with. Government spending for goods and services is also included in domestic consumption. But for one small last paragraph I don't find much analytical data of value and otherwise, just rich on partisan politics.
50 weeks ago
50 weeks ago Link To Comment
It wasn't partisan, Zeke. The article was mostly pointing out the partisanship of the AP. That was clearly the inspiration for the article, although, admittedly, the title did not state that.

We agree, however, that the metrics are flawed. Glad you and I can, for once, agree on something.
50 weeks ago
50 weeks ago Link To Comment
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