Posted on 01/30/2013 5:46:18 AM PST by Perdogg
The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus.
(Excerpt) Read more at cnbc.com ...
And all of the newsreaders will solemnly nod their heads and agree. Less equals more.
I used to think that George Orwell was a prophet. Then I was more Ayn Randian. Now, I think that they BOTH could very well have been right. :-)
I am having a record January, BUT the reason is a little disturbing.
We sell custom printed and embroidered clothing. Our customer base is primarily service companies and other small businesses. We do not pursue government clients or schools or sports leagues, but we will sell to them (not going to turn away business).
Our average order is about $500 and $15K to $20K is a good month. This month the county has bought $6000, a local small college has purchased $3000, a middle school has purchased $5000 and a contractor (who is doing a big government project) has bought $3000 worth of apparel.
In our industry January is historically the second worse month of the year and this month is on track to be our third best month ever.
I am happy for the business, but wish it was because of real economic activity, not just the government spending money they confiscated from us.
If you have not figure it out by now, the Feds need to prevent deflation at all costs, because it will make our banks who hold mortgage notes from becoming insolvent. If deflation hits, home prices along with other items will drop. Those inflated home prices backing what remains of the mortgage notes the banks hold will no longer be assets but liabilities. Since banks could not make 4 to 6 percent on US T Bills they have taken money and leveraged it in the stock market to make money. If banks implode, Wall Street and shadow banks collapse because they are all involve in intricate arrangements in derivatives, swaps and sovereign debt arrangements. All this will implode, thus the Fed Reserve with US Treasury and the entire EU/Japan central banks must keep the system floating by printing more money, thus robbing the future generation of prosperity by crushing them with huge debt notes that must be paid off or chaos by default. Banks are run by CEO’s who belong to high society. This powerful high society allow one to access power and opportunities you and I will never have. If a bank made leveraged bets to powerful banks run by other CEO’s who belong to this inner social circle, they will be paid off before the trouble bank declares bankruptcy, even if the CEO must steal allocated customer accounts. MF Global is the trial balloon. Yesterday allocated investor accounts were stolen and the Fed regulators have not arrest CEO Corzine and his execs. This sends a signal to bankers that customer savings accounts can be used in time of desperation with no consequences. When SHTF even the money in your savings account can be looted, because our financial crisis is a lot more dire then the public actually knows.
Has absolutely nothing to do, of course, with the election being over.
If we use the definition they used for Bush, a single negative GDP Growth, then we are in a recession and it started Oct. 1, 2012.
Wonder what silver lining the msm would find in a devastating nuclear exchange with Obama as president?
LOL. 2.2 percent is good news? We are barely treading water. Some recovery.
Actually, by definition, the recession ended in June 2009. A recession is defined as two consecutive quarters of negative growth in the GDP.
Imagine how many people must live on a knife’s edge if they can’t absorb a 2% cut in salary. Wait until Obamacare kicks in.
Obama is entitled to his own opinion, but not his own facts.
Real Final Sales Up on Consumer and Residential Investment
Obviously, defense spending overstated third quarter GDP and depressed fourth quarter GDP. Therefore, we reemphasize the point that real private final sales to domestic purchasers provide a good benchmark for the underlying strength of the economy and remove some of the volatility due to inventory swings and government spending. Real private domestic final sales illustrate two characteristics of the U.S. economy today that are often lost in the hype of GDP. First, note the relative stability of sales over the past few years. There is a sense that underlying domestic demand has been remarkably stable overall while relative strength has shifted between sectors. Second, note how the pace of sales in the current expansion has clearly downshifted from prior expansions. This reinforces a theme we have often presented that growth in the current expansion has indeed settled into a slower growth pattern compared to the past and the expectations (hopes) of some analysts.
The Pluses: Consumer Spending and Housing—Yes, Housing
Personal consumption and residential investment carried the water in the fourth quarter. Personal consumption was up 2.2 percent in the fourth quarter and up 1.9 percent during all of 2012. Real disposable income grew 1.5 percent in 2012 and we expect it to return to that growth rate in the second half of 2013 after the hit from higher payroll and income taxes in the first half of this year. Residential investment registered double-digit gains in the second half of 2012 and we expect that momentum to remain in 2013. We anticipate that housing starts will pick up to a one million-unit pace by the fourth quarter of this year compared to a 900,000-unit pace in the fourth quarter of 2012. Earlier this week, the Case-Shiller Home Price Index was up 5.5 percent year over year for November—a very good sign.
Wow. You have to hand it to them. A pile of crap, I mean.
GDP Report Has Limited Signal
It’s hard to believe that nominal GDP was almost +6% in 3Q or close to 0% in 4Q. In any event, the dark spot in 4Q real GDP was the plunge in defense spending. The bright spots were significant increases in housing and capital spending. Real consumer spending was +2.2%. The saving rate increased to almost 5%. Real DPI was +6.8% (bonuses paid early and special dividends). The deflator was a hard-to-believe +0.6% a.r. The plunge in inventories is a positive for 1Q.
* Weaker than expected report. However, the bulk of the downside relative to our own below consensus estimate was in the defense category. Otherwise, the results were reasonably close to our expectations.
* The defense decline of 22% was the sharpest since 1972. It had nothing to do with the fiscal cliff or the looming budget sequester. Instead, the drop reflects the combination of two factors: 1) an underlying moderation in defense outlays that has been evident over the past couple of years reflecting a gradual wind down of the US military presence overseas and 2) payback for an unusual spike in spending that was seen in Q3. Over the four quarters of 2012, defense was down 5%. And, over the four quarters of 2011, defense fell 4%. This downtrend will intensify in 2013 if the budget sequester is imposed as scheduled in March.
* The inventory results in Q4 -- a 1.2 percentage point subtraction -- were very close to what we had been assuming and thus the report had little impact on our assessment of GDP growth in Q1. We will have a firmer grasp on the Q1 outlook after the monthly detail is released tomorrow, but at this point we see Q1 GDP tracking at about +1.5%.
* Consumption was right on expectations at +2.2% -- a bit better than the average pace seen over the past year or so. Residential investment continues to be a bright spot, rising 15.3% in Q4 -- close to expectations and close to the average growth pace seen over the prior four qtrs.
* Relative to our estimates, there were modest upside surprises in business capital spending and net exports. However, these were more than offset by the much larger than anticipated pullback in defense.
* The Q4 inflation results were quite benign with the headline deflator at +0.6% while the core PCE price index rose just +0.9%.
* Because of the statistical noise in the defense and inventory components in recent quarters, it is appropriate to average the Q3 and Q4 results to better gauge the underlying performance of the economy. On that basis, GDP was up 1.5% -- which is right in line with the growth pace seenin recent years. Wealth creation associated with the rally in equities and the ongoing improvement in the housing market could create a virtuous cycle at some point. But, for now, the recovery remains quite sluggish and the US economy still faces some important policy risks ahead.
Ben Bernanke = Theodoric of York, medieval barber.
Theodoric of York: Hello, Joan, Wife of Simkin the Miller. Well, how’s my little patient doing?
Joan: Not so well, I fear. We followed all your instructions - I mixed powder of staghorn, gum of arabic with sheep’s urine, and applied it in a poultice to her face.
Theodoric of York: And did you bury her up to her neck in the marsh and leave her overnight?
Joan: Oh, yes. But she still feels as listless as ever, if not more.
Theodoric of York: Well, let’s give her another bloodletting. Broom Gilda.
And how do you propose to bring back American industry NOW?
Gotta start sometime.
Bring them back. I don’t really care how.
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