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.

Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Jon Koplik who wrote (7551)	2/3/2007 11:13:21 PM
From: Jon Koplik	Respond to of 33421

NYT (Floyd Norris) -- When the ‘Real’ Numbers Are Rosy, but the Others Are Less So ..................... February 3, 2007 Off the Charts When the ‘Real’ Numbers Are Rosy, but the Others Are Less So By FLOYD NORRIS SOMETIMES “real” numbers are anything but. So it may have been this week when the United States reported that its economy grew at a surprisingly rapid real annual rate of 3.5 percent in the final three months of 2006. Investors were relieved and stocks leaped. Consumers, it was said, had once again shown their willingness to spend, notwithstanding the slump in the housing market. “Did the economy slow late last year? ” asked Robert Barbera, the chief economist of ITG. “If you look at real numbers, no. If you look at nominal numbers, yes.” Real numbers reflect adjustments for inflation, and inflation was down sharply in the quarter, thanks in part to falling oil prices. The other numbers reported, the nominal ones, are in some ways more real than the real ones. Consumers and businesses spend nominal dollars to buy things and know how much they spent. It is only later that economists calculate inflation rates and ascertain just how much “real” spending was up or down. In the most recent quarter, the real growth rate was also helped by rising inventories — stuff that has been purchased but not yet sold — and by a rise in exports. Those exports are good news for the economy, but they do not reflect American demand for goods and services. That demand can be seen in the category the government calls “final sales to domestic purchasers.” In the final quarter of 2006, that figure, before adjusting for inflation, rose at an annual rate of only 2.5 percent, less than a third of the growth rate early last year. It was the slowest rate of growth since early 2002, when the economy was emerging from the 2001 recession. What seems to have happened is that people cut back on spending plans for the holidays, only to discover they got more than expected because prices were reduced. Another chart shows a similar pattern in personal consumption expenditures, which grew at an annual rate of 3.6 percent. The drop there was not as sharp, but it was still noticeable. The final chart shows spending on fixed investment, a category that includes everything from computers to buildings. It has declined for two consecutive quarters, something that had not happened since 2002. That fall could call into question the widespread expectation that growth in business spending will overcome any weakness in consumer spending brought on by worries over home prices. Earlier in 2006, it looked as if that forecast was a good one. Private nonresidential fixed investment — before adjustment for inflation — rose at an annual rate of 12.1 percent in the first three quarters of 2006, the fastest three-quarter growth rate since 1997. But in the fourth quarter, the annual rate of growth plunged to 1.8 percent. Perhaps that was an anomaly — spending on fixed investment can change rapidly — but it could also be an indication that business spending is being pared back. Meanwhile, spending on residential fixed investment — basically home building — fell at an annual rate of 15.9 percent. That was a little better than the third quarter, but it was hardly a good number. The latest quarter was also the first time since 1991 that residential fixed investment declined in three consecutive quarters. Lower inflation and improved exports made a mediocre quarter appear much better than it was. Copyright 2007 The New York Times Company.