Saturday, June 2, 2007

An Interesting Point on the GDP Numbers That Requires a Further Look

This tidbit, which came The Big Picture, requires some thought:

Here are the facts: The U.S. economy grew last quarter at the slowest pace in more than four years. The initial GDP report of 1.3% was actually more than double twhat the updated data showed, and was 25% below economists consensus. Housing, slack capex investment, declining consumer activity all are responsible for part of the slowdown.

Also included in the Commerce Department Data was that consumer spending was revised upward, to 4.4% from 3.8% (using quarter over quarter calcualtions). Note that if not for this revision, we would be talking about a sub 0% GDP. That would be the first quarter of 2 needed for the official measure of a recession.

How is it possible that consumer spending rose, when 80% of retailers have been missing numbers? Easy: Rising prices (not sales) in food and energy. You know, those elements the Fed hates to measure when it comes to inflation.

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