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Friday, February 25, 2011

GDP Q4 2010 Still Weird

Yup, it is weird. You can look at the weirdness yourself here. The headline GDP number is 2.8% (that's annualized) growth.

But how we get there is still odd-looking; if you go to Table 3 (page 7) we've got PCE up 95.3 billion (durables 57.6 billion), Gross Private Domestic Investment down 112.3, all of which stems from an inventory drop of 114.3, although inventories were almost unchanged in aggregate over the quarter (the previous quarter had a strong build), net exports up 110 billion (after deflation, before adjustment net exports rose 57.5 billion), and -9.9 billion for government spending (-9.1 of which stemmed from state and local cutbacks). All of that ends up at an increase of 91.6 billion after price adjustment, meaning that the net export and inventory adjustment swings canceled each other out.

Oh well.

Table 10 Personal incomes - at least wage and salary disbursements and social insurance is improving again.

Click on this to open it up. You can see that we still are not nearly back to 2008 totals in wage and salary payments, dividends and interest income, although we are getting closer. 2008 was the first full recession year so it's not a very difficult comparison.

Personal income ex current transfer payments ended 2010 at an improved 9.3 trillion compared to 2008's 9.6 trillion. Because personal transfer have increased over 450 billion we come out ahead in disposable personal income.

This is why budget projections are acutely sensitive to economic expectations. If more of us work, more of us pay taxes and the all-important "social insurance contributions". As people lose unemployment benefits this year current transfer payments will probably drop even with more retirements. Also some will be back at work and not need other support programs.

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