Skip to comments.Oops! Economic Growth Wasn't So Great After All
Posted on 04/26/2013 5:42:42 AM PDT by Perdogg
U.S. economic growth regained speed in the first quarter, but not as much as expected, which could heighten fears the already weakening economy could struggle to handle deep government spending cuts and higher taxes.
(Excerpt) Read more at cnbc.com ...
Stand by for Recovery Summer 4.0!
Amazing, since the majority of earnings reports show losses in the top line (revenue). Only continuing cost cutting made it possible for companies to meet estimates on the bottom line (earnings per share), which means they cut employment and did not invest in new equipment etc. No economy grows with that burden, and ObamaCare hasn’t kicked in yet.
What a disaster Obama has brought on our economy!
Hang on tight everyone!
The media yawns.
DEEP GOVERNMENT SPENDING CUTS ARE WHAT IS NEEDED - not the pitiful, miniscule, Washington-style “cuts” (a smaller increase)
No, no, it clearly states: “not as much as expected”.
They’re working hard not to use the word they always use!
...deep government spending cuts... DEEP?
Government lingo translated for the low info voters:
Spending cuts = INCREASES in Govt spending this year will not be as much as we once planned.
Deep Cuts = Reduction of spending increases that we will make sure you notice as punishment for making us plan to reduce the amount of increase in our spending of your tax dollars.
The biggest problem with that is: the velocity of money, which the Fed is dumping into the markets combined with the Govt's deficit spending is enough to generate a 3 to 4% growth rate on its own. So, absent this money, the economy is actually contracting at an alarming rate.
1Q13 GDP was up +2.5% though that was well below the 3.0% consensus estimate.
1% of that was replenishing inventories.
Real personal consumption expenditures increased 3.2 percent in the first quarter, compared with an increase of 1.8 percent in the fourth. Durable goods increased 8.1 percent, compared with an increase of 13.6 percent. Nondurable goods increased 1.0 percent, compared with an increase of 0.1 percent. Services increased 3.1 percent, compared with an increase of 0.6 percent.
Real federal government consumption expenditures and gross investment decreased 8.4 percent in the first quarter, compared with a decrease of 14.8 percent in the fourth. National defense decreased 11.5 percent, compared with a decrease of 22.1 percent. Nondefense decreased 2.0 percent, in contrast to an increase of 1.7 percent. Real state and local government consumption expenditures and gross investment decreased 1.2 percent, compared with a decrease of 1.5 percent.
Any truth to this?
That's true, but it's not skewing this number since they backed the info into the old numbers for a more fair comparison.
How far back?
A little known bit, however, is WHY this change is taking place. Well, I can tell you: The U.N. Yes, that U.N. They developed a new UNIVERSAL system that all nations are to convert to, with the US being one of the first. Link Here
My understanding is that the rewrite goes all the way back, but when I saw your question I looked for confirmation of that to post a link and couldn’t find one. I did hear them talking about it a good bit on CNBC this week.
Thank goodness for the new statistical methods to figure GDP starting in July. Growth will be back and good times here again for all.
Personal consumption expenditures (PCE) increased at a 3.2% annualized rate, and residential investment increased 12.6%. However equipment and software increased only 3.0%, and non-residential investment in structures declined slightly.
“Change in private inventories” added 1.03 percentage points to GDP in Q1 (reversing most of the decline last quarter), and the Federal government subtracted 0.65 percentage points (mostly a decrease in defense spending). State and local governments continued to decline.
This was below expectations of a 3.1% growth rate, but domestic demand was decent with PCE and private investment increasing. I’ll have more on GDP later ...
Look at post 14. It contains the data on government spending decreases.
There is no way they would make that change and not adjust all periods.
Drudge has link showing 2.5%
Overhyped Q1 GDP Grows By Only 2.5%, Biggest Miss To Expectations Since September 2011
Less than an hour ago we speculated that "it wouldn't be surprising for GDP to come substantially weaker than expected, only to be revised higher (or lower) subsequently." Sure enough, we have gotten at least the first part right for now, with the advance Q1 GDP number printing a very disappointing 2.5%, on expectations of a 3.0% increase, up from 0.4% in Q4, and the biggest miss since Q3 2011. The reason for the big miss: Inventory and Fixed Investment came well below expectations, comprising 1.03% (of which autos represented 0.24%) and 0.53% of the 2.5% annualized increase GDP. Kiss the great CapEx investment story goodbye.
The only silver lining in today's otherwise very weak report: Personal Consumption Expenditures, which were a sizable 3.2% versus the 2.8% expected, and amounted to 2.24% or virtually all of the net Q1 GDP growth. So far so good .The bad news, however, is that this number will not sustain into Q2 and look for expenditures to plunge in the coming quarter. Finally, let's not forget that it rained like 5 days in March, so there's that. And of course, very soon, all GDP will be revised to add intangibles, so in retrospect Q1 GDP will likely have grown by a Ministry of Truth blush-inducing 10% or so.
And for those confused why the spending spree led "recovery" won't last, the answer is simple: the US consumer is out of money, as can be seen by this savings (or lack thereof) rate chart.
The economy is “struggling because of deep government spending cuts”???
#1- Have there been real cuts in spending? Or are the increases less than liberals desire?
#2- And government needs to spend even MORE than Obama has been doing to get the economy out of the dumps? Really?
"We are carrying these major changes all the way back in time - which for us means to 1929 - so we are essentially rewriting economic history," said Mr Moulton.
Five Takeaways from Today's GDP Report:
The U.S. economy grew at a rate of 2.5% in the first three months of 2013 much better than the 0.4% growth rate at the end of 2012, but well below economists expectations. Experts are still digesting todays report, but here are five initial takeaways.
Consumers look strong. The New Year greeted households with a one-two punch of higher taxes and rising gas prices, but consumers seem to have shrugged off the hit to their wallets. Consumer spending rose at a 3.2% rate in the first quarter, the best pace since late 2010. Spending rose especially quickly in durable goods, longer-lasting items like cars and dishwashers, and another big jump in the construction sector provided further evidence that the housing market rebound is real. Imports rose too, which detracted from economic growth, but is another sign domestic demand is strong.
Businesses, less so. If the consumer sector gained momentum in the first quarter, businesses lost ground. Spending on equipment and software, a proxy for business investment, rose at a 3% pace, down sharply from 11.8% at the end of 2012. Investment in industrial and transportation equipment actually fell, as did spending on structures like stores and factories. One bright spot: Exports rose, a sign of strength amid a shaky global economy.
Government remains a drag. Falling public-sector spending continued to pull down growth, falling at a 4.1% rate, the ninth decline in the past ten quarters. The drop was concentrated in the federal government, in particular defense, where spending fell at an 11.5% rate. That followed a massive 22.1% pullback in defense spending in the fourth quarter.
Watch the trend. The first quarters 2.5% growth rate may have disappointed economists, but it still marks a reasonably healthy growth rate, especially compared to the end of 2012. Economists caution that 2013s early strength was at least partly a rebound from the artificially low growth rate at the end of 2012 businesses built inventories very slowly in the fourth quarter, then had to build them back up to start the year. But the slow fourth-quarter inventory number was itself a reaction to an unusually strong build-up in the fall. Average all three quarter together and the economy is growing at a 2% rate.
But worry about the future. The first quarters reasonably healthy growth was driven largely by the consumer sector. That could spell trouble going forward. After-tax income fell sharply in the first quarter, meaning consumers had to save less to spend more. That cant continue forever, especially after the still-shaky job market slowed again in March. Falling gas prices and rising real estate and stock markets should help prop up consumers, but there are already signs that spending slowed in March.
Those in power have different goals than you do.
Media and Obama preparing “Boston Terror Attacks” as reason for 2nd Qtr GDP, when it fails to meet expectation.
Note: See page 3 for list of Intangibles to be included in GDP total. This report was from May 2009, so the change has been planned for a while. They know what is going on, and what’s ahead. They just need to cover it up by rewriting history
—— The economy is struggling because of deep government spending cuts??? ———
Insane, stupid, or ignorant?
In most cases, with reporters, I suspect it’s ignorance. I’ve never seen a reporter demonstrate an understanding of basic economic principles.
The other half of the problem is that that THINK they’re knowledgeable. I blame diplomas for this. It’s just like The Wizard of Oz.
More hope for a fool than a man who is wise in his own eyes.
6% across the board to non-defense, 9% across the board to Defense, which translated to a 13% reduction because it fell in middle of the fiscal year.
Yes, deep. The "2%" cut you hear Sean Hannity spinning is not accurate, because 63% of all spending is on Entitlements, and they are exempt from Sequestration. That means 37% of the rest (non-mandatory spending) took 100% o of the cuts. For Defense, it is much worse - they are 17% of the overall budget, yet they absorb 50% of the cuts by law.
I GUARNANTEE you that is Social Security checks were cut 6% or 9%, people would be SCREAMING that those were deep cuts.
You know that as well.
There have been REAL CUTS in Defense spending. There were $487 Billion in cuts (over ten years) that started two years ago, and that was before Sequestration kicked in with another $650 Billion in cuts.
Put another way, this is not a baseline budget gimmick for Defense - there are LESS real dollars (much less) in the budget than in previous years.
Again, REAL cuts.
And it is going to get worse for the military (a Constitutional enterprise, by the way).
I cannot speak for other agencies.
See post #38.
soooo, let’s spend more money we ain’t got.
Associated Pravda story this morning claims 2.5 percent growth rate. These liars can’t even get their stories straight.
Oh, come on now.
Savings ain’t all that bad!
Heck, I got all of 43 cents last month from mah $10,000.00 dollars in that there savings account!
I'll take a +2.5% annualized. And yes, you missed your prediction, but so what? Growth is growth (even if you take out the Fed QE whatever's 1%).
You do good work/commentary.
And no, I haven't analyzed the data yet, and probably won't until the initial estimate is revised in a few weeks.
Well I don’t watch TV anymore, haven’t done so for years. So don’t know don’t care what Hannity has to say about anything. I know he still affects new viewers to conservative perspectives which is good but in sum he’s not much use to seasoned conservatives.
I think all the cuts you are referring to are cuts to programmed increases and not baseline budgets. So if the programmed increase for fiscal year was 3% the for example a 6% cut to a 3% increase leaves a 2.82% increase.
Thanks. And don’t forget the all important third and final revision... ;-)
Very good statement on quarterly earnings.
The news focus is on profits.
But revenues? Down for most part.
GP and EPS growth is good news to the stockholders (and nothing wrong with that).
But jobs and economy growth come from the top line. And this quarter was terrible for revenues.
They always do that and we ALWAYS fall for it! What is it that they say about insanity? hmmmm?