U.S. GDP & economy grows at 5.7% but can it keep up?

January 29, 2010 by · Leave a Comment
Filed under: Economic News 

It sounds like a robust number but when you look what it is compromised of, 3.4% of it is from inventory restocking from the holidays, not growth in spending.  According to the article, the major impact of inventory rebuilding is a red flag for numbers going forward.  The market has priced some real recovery in 2010 and it might not happen so we could see another leg down in the economy.   We will be watching the next 2 quarters closely and if it doesn’t not support the recovery, we will have a choppy September and October.

Forbes – The U.S. economy crushed expectations by growing at a 5.7% clip in the fourth quarter of 2009, but even as Wall Street rallied on the news there are plenty of warning signs of a slower pace ahead.

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U.S. GDP shrinks 6.1 pct in Q1, worst in 50 years

April 29, 2009 by · Leave a Comment
Filed under: Economic News 

I guess its a “buy” on Wall Street when our GDP collapses.  Interesting if you ask me.  I think I know the formula, buy on the rumor and sell on the facts except when it comes to GDP.  I sort of understand why banks might be a buy, maybe the GDP drop is part of the deleveraging process.  Well this might be a good trend if people are not consuming as much and instead are saving and investing.

News (Bloomberg):

The U.S. economy plunged again in the first quarter, making this the worst recession in at least half a century.

Gross domestic product dropped at a 6.1 percent annual pace, weaker than forecast, after contracting at a 6.3 percent rate in the last three months of 2008, the Commerce Department said today in Washington. The report, which reflected a record slump in inventories and further declines in housing, comes hours before Federal Reserve officials decide how much money to pump into the economy.

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U.S. economy GDP contracts 6.2% in 4Q

February 27, 2009 by · Leave a Comment
Filed under: Economic News 

This is pretty bad news. By some definitions, a decline of 10% or more in national GDP is considered the signal of a country entering into a depression.  I believe we will have a “soft depression” that would have a slow decline with a longer period of a harsher economic environment.  It is not clear if that is the correct path to take if it is clear we are entering into a depression.  This unprecedented amount of governmental intervention has soften the decline a little, but at the same time, we have more uncertainty and volatility.

Having a quick and severe decline in my opinion would be preferable even though we may have a short period of economic crisis.  This would noticeable restore confidence in our markets by getting these bad debts to market and into the light.  This is turn would allow us to start rebuilding our economy in a manner that is more productive with a long-term outlook to prevent from being so vulnerable to these cyclical crisis-es.  The more we decide to intervene in this important market function, the longer it will take to sort this mess out and move on to even more important issues at hand.

News:

The U.S. economy contracted at its sharpest rate since early 1982 in the fourth quarter, revised data showed on Friday, as exports plunged and consumers cut spending by the most in more than 28 years.

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