Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (148140)	2/3/2002 11:09:48 PM
From: Les H	Respond to of 436258

The GDP Waltz forums.delphiforums.com First, they make an announcement. Then the next month they lower it. Then the next month they lower it again. By that time nobody cares because it is the end of the quarter and all we are focused on is what is now the last quarter. One-two-three. One-two-three. Second quarter, if memory serves me right, the number started out at a positive 1.0% and was finally corrected to 0.4%. When the number for the third quarter came out in October, it was down 0.4. I publicly wrote and made a bet with Greg Weldon that the actual number would be -1.2%. He said -1.1%. He was dead on. This is not a recent pattern. It has been going on for years. It has to do with the way the numbers are estimated. The actual numbers in a few months will show last quarter to be negative, but less than a negative 1%. The quarter was surprisingly good, given the fact that corporate profits were so bad. But a close look at the numbers gives little evidence for a strong recovery. Consumer spending grew at an annualized 5.4% last quarter. 94% of that gain was in “consumer durables” with 70% of that being in cars. Stephen Roach of Morgan Stanley tells us why to keep the party hats in the closet. “Never before have consumers spent with such a vengeance in the depths of recession. In the 28 quarters of the past six recessions, real consumption growth averaged a scant +0.5%. In only two of those quarters did consumption growth come in at 3.5% or greater -- 2Q60 (+5.1%) and 3Q70 (+3.5%). And those spending bursts borrowed from the immediate future; they were both followed by declines in the subsequent quarter that averaged -1.4%. The lesson is clear: With jobs and income under pressure, paybacks are the norm in the aftermath of mid-recession consumption spurts.” He and other articles noted a few other reasons. Government response to terrorism increased spending by 9.2%. State and local construction grew at an annual rate of 35%. Both are temporary growth spurts. Roach states the case for a double-dip recession as well as anyone: “The double-dip call, however, is not premised solely on a statistical analysis of the national income accounts. There is, in fact, a much deeper meaning to all this. This recession -- especially if it’s now over, as most suspect -- has done next to nothing to purge America of the excesses that built up in the Roaring 1990s. The American consumer remains overly indebted and saving-short; the personal saving rate fell back to 0.5% in 4Q01, and there is good reason to believe it was even lower than that at the end of the quarter. Corporate America continues to be plagued by bloated costs -- from both capacity and workers; the capital spending share of GDP has now fallen from a cycle high of 13.2% in 4Q00 to 11.6% in 4Q91, completing only about half the adjustment that has occurred in past secular downturns in business fixed investment. And America’s current- account deficit remains at about 4% of GDP -- a near-record shortfall and in sharp contrast to the near balance that typically occurs in recession. “Such profound and persistent excesses are simply not conducive to sustained economic recovery, in my view. They leave the US economy bucking powerful headwinds in the aftermath of any inventory-related pop to activity that may be occurring in the current period. In short, I have a hard time believing that a sustained cyclical lift- off can occur with a zero saving rate, a 4% current-account deficit, and a lingering overhang of excess capacity. Given the likelihood of a demand relapse, these lingering structural excesses provide a seemingly classic set-up for a double dip.” >>>more at the above link