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 ...
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.
5.56mm
/johnny
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.
*rolling eyes*
They always do that and we ALWAYS fall for it! What is it that they say about insanity? hmmmm?
Sequester's Fault!
These Hosts are all huffing and puffing that is so much better than 2012 4th quarter number. In reality if the same methodology had been used it would have been no better than the 4th quarter, maybe worst.
That is good, and suggests the end of the Payroll Tax Social Security contributions holiday did not have as bad of an impact as first suggested.
"Durable goods increased 8.1 percent, compared with an increase of 13.6 percent."
That looks bad. Durable goods are big ticket items (cars, appliances, etc.), not the kind of things which generally have a big holiday spend.
"Nondurable goods increased 1.0 percent, compared with an increase of 0.1 percent."
That is good.
"Services increased 3.1 percent, compared with an increase of 0.6 percent."
That is good.
"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."
So the government spending decrease slowed.
"National defense decreased 11.5 percent, compared with a decrease of 22.1 percent."
Again, the government spending decrease slowed.
"Nondefense decreased 2.0 percent, in contrast to an increase of 1.7 percent."
Here government spending decreased. The Sequester! The Sequester!
"Real state and local government consumption expenditures and gross investment decreased 1.2 percent, compared with a decrease of 1.5 percent."
The state and local government spending decrease slowed.
I do think it is fair to say the reduction in government spending (primarily military), is negatively impacting the economy. The 1990 recession was in part due to the dramatic reduction in defense spending as the result of the end of the Cold War.
The country is essentially in a steady state economic depression. The little growth we see is not keeping up with monetary inflation (QE) and population growth.
However, the real question is why should the American economy be so tightly coupled to, in fact, dependent on, Federal Government spending? We have seen major increase in federal spending (the Stimulus) accomplish little. But a minor reduction in spending causes a moribund economy?
We need to cut government spending, and incentivize business spending.
I would be lost without Zero Hedge’s analysis.
He does good work.
I would disagree about “cutting government spending in a real sense. I think the austerity measures in Europe have shown that they don’t work as they slow the economy down and that ends up affecting the private sector. I believe the only solution is to create the most pro-growth environment possible from a regulatory and monetary standpoint. Economic growth is the only way out of this. Then you control the levels of government spending increases. Tax revenues, no matter what the rate, average around 18% of GDP. We need to slow the government spending growth rates down to have spending as a percent of GDP decline from where it is now (above 25%) to settle in around 20-22%. This will significantly reduce the deficits to a much more sustainable level.
Weak GDP report no excuse to pump-up government
James Pethokoukis | April 26, 2013, 11:43 am
Another big decline in US government spending took its toll on first-quarter output. But the way to accelerate GDP growth is by boosting the private economy, not re-inflating the public sector.
The nation’s gross domestic product, adjusted for inflation, grew at an annualized rate of 2.5% in the year’s first three months. Hardly a great number given the huge gap between GDP’s pre-recession trajectory and where we are now. (See above chart). The economy is not growing fast enough to close that multi-trillion dollar growth shortfall (or a similar one in the job market).
But the data continue to suggest a tale of two economies. Real GDP growth has averaged only 1.4% over the past two quarters, notes RDQ Economics. But private-sector GDP — excluding government consumption and investment — grew 4.0% in the first quarter and has averaged 3.0% over the past two quarters — about what it did from 1983-2007. Falling government output is what’s tamped down the overall growth number. In the first quarter alone, the 4% decline in government spending knocked a point from GDP. Indeed, government has subtracted from GDP for 10 of the last 11 quarters.
But is that a bug or a feature of this recovery? The decline in government spending — the sharpest year-to-year contraction in real federal outlays since Ike’s Korean War demobilization — continues and is no doubt taking a toll on private-sector growth. The fiscal cliff tax hikes, too. Yet not only is the private sector growing at trend, but job creation is averaging 200,000 month. Not a boom, but not stagnation, either.
The wisest next step isn’t another massive fiscal stimulus simply to boost government’s contribution to GDP. Longer-term, smaller government — provided that there is enough spending on public goods like defense and basic research — is good for the economy. (Most recent studies finding a negative correlation between government size and growth.) Expand the most productive bits of the economy, not the least efficient ones.
US spending austerity — though some should be offset by entitlement savings — is roughly on the right trajectory. What’s needed now are measures to aid business, including tax cuts and more high-skill immigration, as well as continued monetary easing.
Special thought also should be given to the long-term unemployed. Skill degradation and workplace bias might mean a rising tide won’t lift their boats. AEI economist Kevin Hassett recommend policymakers investigate a number of options, including tax subsidies for hiring, workplace sharing programs, and helping workers move to areas with higher job growth.
Growing the economy doesn’t have to mean growing government.
If FedGov™ stopped the deficit spending ($1.1T per year) GDP would be negative 5%.
Agree. Programs like those would be a much better investment than Extended UI, SNAP, TANF, SSI, SSDI, Medicaid, and Disability Medicare.
In many cases, Extended UI failed, because either the economy did not recover fast enough, or due to structural changes in the economy. "Waiting out the recession" is no longer a viable strategy.
But the rapid growth in people dropping out of the workforce and dropping into the disability welfare system, is something that will be very hard to undo.
“But the rapid growth in people dropping out of the workforce and dropping into the disability welfare system, is something that will be very hard to undo.”
Agree given the upcoming demographic challenges and that the government is literally recruiting to put people on disability. We face long term structural and political issues that are going to be huge inhibitors to growth.
The new methodology applies to every GDP report since 1929. So while it may boost the GDP number, you can still go back and compare it to the others.
Thanks, I twittered that....hope you don’t mind.
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