Posted on 11/29/2007 6:32:25 AM PST by Sub-Driver
Economy Grew 4.9% in 3rd Quarter, Up From Previous Estimate of 3.9% By JEFF BATER November 29, 2007 9:06 a.m.
WASHINGTON -- The U.S. economy soared last summer, growing at a rate much stronger than earlier estimated, but the earnings of companies were flat, the government reported Thursday.
Gross domestic product rose at a 4.9% annual rate July through September, the fastest quarterly pace since 7.5% in third-quarter 2003, the Commerce Department said.
The new, 4.9% estimate for third-quarter 2007 GDP reflected a revision up from a previously reported 3.9% increase. Higher inventories and exports were behind the government's revision to GDP, a measure of all goods and services produced in the economy.
The median estimate of 20 economists surveyed by Dow Jones Newswires was a 4.9% increase in the third quarter. The surge beat the strong, 3.8% pace of second-quarter GDP. But data suggest the economy slowed, perhaps sharply, in the current, fourth quarter; the first estimate of GDP for the period won't be released until Jan. 30.
Corporate profits after taxes were unchanged in the third quarter, at $1.152 trillion, from the second quarter, the report showed. Profits in the second quarter increased 5.2%. Year-to-year, profits rose 2.7% since the third quarter of 2006.
(Excerpt) Read more at online.wsj.com ...
But, credit, houses, mortgages are all killing Americans.
No, wait that comes from the MSM cannot be trusted.
yeah, but...but....there are 50 gazillion Americans without health insurance!!!!
Larry Kudlow said this on JB the other night. This is not new to wall street.
Puts the Fed in an even tougher spot; the equity markets are howling for another rate cut, but these numbers are going to increase concern over inflation.
Oh Snap!!
Harry Reid is saddened. Nancy Pelosi hates this news. Democrat candidates on suicide watch.
We’re doomed..........
It’s actually very good! It’s easy to show huge gains when you start with little to nothing as is the case in developing nations. In established and developed economies such as the US, 4% growth is actually very impressive. Denmark for example is doing fairly well, and they are sitting at 3.5%. France and Germany are nearly half with 2.2 and 2% respectively. The point is that you should not expect 10% growth in a developed economy, and 4% is already on the impressive side.
Frankly, though I’m 100% in support of the war, the war and the rising cost of oil has had a negative impact (Of course for others as well) and we probably could be punching out even higher rates if it were not for these drains on us. I imagine that the conservative estimates bellow 4% by some was largely based on oil prices.
The MSM will just re-run 'the subprime meltdown' instead.
Bush’s fault.
Democrats and media are deeply saddened
First time I went to the link the GDP story was there. Now it’s a story about new home sales. But there is another story that talks about a 3.9% GDP’s 3.9% Was the 4.9% story in error?
Ben Bernanke, please pick up the nearest Red Inflation Telephone.
Mr. Bernanke, Uncle Miltie is on line 1, and he doesn’t sound happy.
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My goodness ... it’s like your child get one A after another after another ... and you’re worrying, omygod, what if Johnny gets a B.
“Economy Grew 4.9% in 3rd Quarter, Up From Previous Estimate of 3.9%”
I blame Bush.
In this case, a survey of estimates from economists produced by the Commerce Dep’t isn’t to be trusted completely before all the revisions are put in later.
But first, let’s get to the source and get the media out of the way:
http://www.bea.gov/newsreleases/national/gdp/2007/pdf/gdp307p.pdf
Second, when you read the numbers therein, without the useless intermediary of business ignorant people in the lamestream media, you see that the picture isn’t all cherries and roses.
Go through the section “Corporate Profits” carefully and you’ll see it.
Isn't this the phrase that's been inserted into nearly all stories on the economy during the Bush administration?
Is this adjusted for the falling value of the dollar? We know inflation is being grossly under represented. Just go buy lunch somewhere and think what did a sandwich cost last year? Or go to a candy machine where stuff cost 65 cents 2 years ago, 75 1 year ago and $1 today.
Can’t wait to talk to local retiree who was so effected by the recent market correction, everyday he was doom and gloom until I iterated all the good things, to which he did know businesses were doing very well. He must just watch CNN all day.
Is food even close to the largest % of your budget? It’s about 4-5% of mine.
Profits dropped a lot due to write downs in the subprime shake out. Besides financial corporations, profits increased around $12 billion.
Add Gasoline — I live in Nebraska which is 500 miles across. Rises in Gasoline hits us hard. Not to mention farmers.
Roll that gasoline cost into any item trucked into the cities, too.
And Energy? I got a new furnace/AC last year to reduce energy costs (I’m retired on fixed income) but my level payment plan went up a lot.
Are you not noticing the inflation in your budget? those examples were for simplicity sake.
I’ve seen food and gas go up by a decent amount. Electricity is up around 4% here. Housing drop, clothing drop, electronics drop, computers drop. Pretty much everything else has been flat for me. My overall cost of living is probably around 2% more than last year. Meanwhile average median wage increase in my area is up around 3.5-4%.
Never mind.
So the answer to my question about the GDP rise does NOT reflect to the fall of value of the dollar. Thanks.
Correct.
But when you know the behavior of markets, you also know that when financials lose money, they pull their heads in, lending slows, and as a result the economy slows.
You can see the results in the Fed’s Beige Book survey from yesterday.
Long story short: The administration’s handling of the problems in the finance sector has been pathetic. It does have the power to push the economy into recession, and it appears that the sub-prime problem is spreading into other sectors of the economy - listen to cisco’s conference call and NB how Chambers makes specific mention of the collapse in IT spending from the financial sector. Look at how non-mortgage lending is being impacted, etc.
The Bush administration appears completely AWOL on the one issue that has a better chance than any other of delivering the WH into Hillary’s hands next year. Complete malfeasance, IMO.
It does reflects inflation adjustment but not the fall to other currencies. GDP growth rate before inflation adjustment grew at 5.9% in Q3.
Won’t argue with that.
The Fed reports on inflation “ex food and fuel” - and guess what? Those are the two areas in the economy where we’re seeing very tidy rates of inflation.
This manner of reporting inflation - ie, the Fed’s obsession on wage inflation - is nearly useless in this cycle of commodity-driven inflation. The increase in consumer prices due to fuel/food pass-throughs show up much later than if the reporting took food & fuel into account in the inflation computations.
Millions of savers are being robbed of their personal savings with the devaluation of the dollar. If this isn’t clear to everyone, you need to learn more about the dollar devaluation.
http://ftalphaville.ft.com/blog/2007/11/07/8713/the-dollars-slide-13-down-and-falling-faster/
Here is a chart of the dollar’s buying power since the 1970’s.
The $ dropping vs the Euro & Pound isn’t a huge cause for concern. There is very little that we can’t produce here for cheaper at this point than Europe. That is good for US business. Consumers get far more products from Asia. The $ is down 5% from then Yen in the last 5 years and 6% vs the Yuan. The dollar is up 2% vs the Peso in that same time frame. The high euro is killing exports and growth there while causing a huge boom here.
The Fed has many inflation measures. Many of which include food and fuel.
CPI & PPI do include food & fuel. Core CPI does not. CPI is just over 3%. Core CPI is at 2%.
“From October 2006 to October 2007, finished goods
prices advanced 6.1 percent. Over the same period, the index for finished energy goods climbed
16.6 percent, prices for finished consumer foods rose 7.1...”
That's not buying power, that's conversion rate.
And our 65,000 troops in Germany? Do you suppose we hire contractors there and pay them in Dollars or Euro?
Personally, I’d bring them home now that the cold war is long gone or move them to Afghanistan/Iraq. Besides, they still get food and shelter provided by the military so it’s not like they could be that worse off. If the military wanted to offer a cost of living adjustment there then that’s fine..but that’s 65k people out of a US population of well over 300,000,000
DOOMED!
Yes. We need to quit stationing tens of thousands in Japan and tens of thousands in Germany and bases in over 100 nations around the world.
As far as Germany is concerned, my guess is as many civilians as military just to maintain the base. What is your guess?
“The Fed reports on inflation “ex food and fuel” - and guess what? Those are the two areas in the economy where we’re seeing very tidy rates of inflation.”
If it included gasoline, when the price dropped from $3 to $2.50 everyone would have to start talking about 17% deflation, and now at $3.20 panic about 28% inflation. That makes the measurement useless.
Therefore, we measure inflation by the prices of things that don’t vary wildly from week to week.
What most consumers obsess about is gasoline. Price goes up, price goes down, and it hits consumers directly in disposable income. That’s pretty easy to measure.
What most economists and policy makers should be obsessing about is the price of diesel fuel (or, more accurately, distillate), which hits consumers in the price of everything that has to be shipped — coal to power plants, food to stores, food being harvested, finished goods to/from ports, jet travel, bus travel, you name it.
The fact is that we get only about half as much diesel in cracking a barrel of oil as we do gasoline also blazes by most consumers (the “3-2-1 crack” of crude).
And as a farmer, lemme tell you that five years ago, I used to buy non-taxed (ie “off-road”) diesel for about $0.70/gal.
Today, if I wanted to get a load of diesel, it would cost me about $3.10/gal - without taxes. That makes the price of my goods (hay) go up, which is making the price of milk go up and in between here and there, the cost of trucking hay to dairies and milk from the dairies to the fluid plant and from the fluid plant to your store has gone up, up, up — all due to diesel fuel.
That’s inflation, and it is stupidity on the part of policy makers to not measure it, because consumers *are* seeing it in the end.
The PPI doesn’t include fuel to the extent that fuel is really jacking prices up - in part, because of how fuel price increases are being billed to me.
Shipping companies now give me my bill with the “same” shipping cost as two years ago - some even three years ago.
What has been going up is the “fuel surcharge” on the bottom of the bill. I’d like to know for certain whether these pass-through fuel surcharges are actually being computed into the PPI, because what is being reported for PPI and what I see in my input costs don’t come even remotely close to congruence.
OK, so you want to take an inflation measure that isn’t perfect and reduce it to an inflation measure that’s useless because it bounces up or down 20% every month.
Thanks for your opinion.
It is good for *some* US businesses. It is not a universal good.
Any business that has to buy inputs that are imported from offshore is feeling the hit.
Too many people keep looking at how the $ is doing against the Euro, and for most intents and purposes, I agree, we don’t need to worry about that situation. The EU has their own central bank, and if they want the Euro to not be so strong against the USD, they can take care of it themselves. In this regard, I’m in the crowd that is holding up the smallest violin in the world when the ECB gets to complaining about the USD.
The issue is the Yuan-USD “soft peg” — it keeps China flooding our markets with their crap when, if the currencies were priced correctly relative to each other, it wouldn’t be such a foregone conclusion to move so much production over to China and just jack up the deficits (current and trade).
The other issue is the peg to the middle eastern currencies. If they pull that peg or sell oil in another currency (or a basket of currencies), we’re going to see a sharp spike in the price of oil.
They could smooth it. This isn’t rocket science. Pick a moving average - simple or exponentially smoothed, bridge at least three futures expiry dates and start there. It would result in a better reflection of the input costs to the economy and factor out the exogenous price spikes and dips due to futures speculators.
Just sticking our heads into a hole, which is what is being done now, is far more useless and is being partly reflected in the decline of the USD.
The prices of volatile items do filter into everything else in exactly the method you yourself describe:
“What has been going up is the “fuel surcharge” on the bottom of the bill. I’d like to know for certain whether these pass-through fuel surcharges are actually being computed into the PPI, because what is being reported for PPI and what I see in my input costs don’t come even remotely close to congruence.”
Obviously not only in your situation but every good that gets sent anywhere producers and retailers pass along the increased fuel cost. In that way the volatile costs get reflected in the prices of everything else.
Also obviously the local appliance store does not raise or lower its prices like crazy just because the truck bringing refrigerators charged more one month and less the next. Instead the refrigerator’s price rises based on the trend, which is exactly the smoothing you mention.
The stats that the government puts out concerning inflation are a fiction.
Money of zero maturity grew by 16%.
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