Friday, April 27, 2012
GDP About What I Expected
The problem is that from here on it gets harder. The weather and the calendar were honest-to-God helps this quarter, because the early Easter/Passover moved some consumption spending into the first quarter. Early job gains helped PCE somewhat, and the milder weather cut energy bills, thus giving households more money to spend. Tax refunds help a bit in this quarter too.
When you chop through the underbrush on this report, quarterly growth was just about entirely PCE growth (Table 3, 73.4 billion, PCE growth of 68.1 billion). Gross private domestic investment was about 54 billion less than in Q4, even with the weather/construction assist. Unfortunately, the weakness in fixed investment (which dropped over 21 billion) sort of dominated that category. Build up of private inventories was respectable at 17.3 billion, 37 billion less than in Q4.
Government spending dropped, of course.
The increase in GDP is very closed to potential, but real disposable incomes aren't increasing much, and this is the problem.
Housing sales numbers have also been helped recently by the FHA premium increase in April, which definitely prompted purchases. Gross private domestic investment grew a measly 10 billion without the inventory gains, and this doesn't project strength moving forward. Equipment and software only netted 4.9 billion. I suspect that small businesses, at least, are shifting more profits into compensation increases to redress for inflation.
If we could sustain job increases we could stay afloat. I'm just not seeing how well we can sustain job increases. The consumption side of the economy is most definitely assisted by retirements which introduce additional flows of income that show up in purchasing activity, but there is a future flip side to that. Much of the additional money is coming from federal, state and local governments, and for each, it requires tax increases and additional cuts in spending. Thus it is not going to be a net positive for all that long.
If you want to understand the trap, see Table 5 in the GDP report. That gives you quantity indexes.
Since 2005, GDP has grown a meager 7%. Personal consumption has grown about 8.5%, and Gross Private Domestic Investment has fallen over 12%.
The current cant is to write economic treatises on Great Housing Expectations, but the reality is that most of our federal efforts to support housing over the last few years have dragged first-time buyers into the negative net worth pit
This was neither brilliant nor humane, and it will come back to haunt us, along with the impact of the student loans. We must bear the chains we have forged for ourselves. Today, Dickens rules.
I've been here alone with "Pro Cleanse" all weekend and nothing's passing.
For the love of all that is holy, please create a new post, lol. ;)
I just received a letter from a major manufacturer of brake and hub parts that they are rescinding their announced price increase that was to go into effect on 5/1/12. Maybe demand isn't so strong?
Also, California tax revenues for April appear to be about $2 billion short of budget. Good thing they have proposed tax increases on the ballot. I am sure that will increase revenue, haha.
Tragically, the US economy is not due for the birth of green shoots.
What do you want me to say? Most real growth in incomes is coming from SS checks. It's not a happy picture, and China is going to suffer most of all.
No matter how many times we jump off buildings and practice positive thinking on the way down, the landing always hurts.
Chicago PMI, and MVs are the bright spot there. Haha.
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