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To: Judy who wrote (25762)	4/26/1999 8:40:00 PM
From: Lee	Read Replies (1) \| Respond to of 50167

Hi Judy,.>Re:. Do you have a feel for the GDP coming out this Friday? I'm guessing upwards of better than 5%. Maybe lots better! <g> The only thing which could keep it somewhat lower is the trade deficit, ($19b in Feb.), but inventories should add and consumers are still going gang busters. Consumers account for 68% of the number and retail sales were revised significantly upward for Jan and Feb. Housing spending is still very robust as well which contributes to investment spending and I think business investment has been healthy also. Regards, Lee

To: Judy who wrote (25762)	4/29/1999 9:03:00 AM
From: Lee	Read Replies (1) \| Respond to of 50167

Hi Judy,..Re:. GDP coming out this Friday Most pundits I've been hearing are saying the number will come in around the high 3's or maybe 4%. My first guess was 4% but when I thought about car sales and consumer spending, and 4Q98 coming in above 6%, I upped my guess to 5%. Now after reading the article posted below from thestreet.com, I'm getting cold feet about 5% or better.<vbg> Even James Padhina is guessing in the 3's! And he's about the best economics writer I've come across! With his permission, here is his take on the number. find.thestreet.com ________________________________________________________________ It Takes Guts to Do GDP Math By James Padinha Economics Correspondent 4/28/99 3:16 PM ET Madness JACKSON HOLE, Wyo. -- Quit reading now if you ain't into GDP math. Otherwise grab a pencil and a piece of scratch paper. Gross domestic product (or GDP) equals personal consumption plus investment plus government spending plus net exports (exports minus imports). Investment accounts for roughly 16% of GDP. It comes in the form of business inventories; residential buildings; commercial buildings; and what the government calls producers' durable equipment (or PDE). PDE is commonly known as business investment; it accounts for roughly 51% of total investment and roughly 8.1% of GDP. Why the accounting introduction? Because durable goods numbers were released today, and they provide a peek as to what kind of performance PDE will show when first-quarter GDP numbers are released on Friday. PDE comes in the form of aircraft (roughly 4.5% of the total); motor vehicles (roughly 19.5% of the total); and All Else (roughly 76%), which consists of things like information processing equipment and computers and peripherals. The recent performances of these three animals are listed in the latter columns in the table below. Business Investment Dissected When PDE NDCGSEA Vehicles Aircraft 1Q99 (0.9%)* (3.3%) (0.4%) (15.1%) 4Q98 13.2% 6.9% 10.9% 65.4% 3Q98 (6.3%) 5.8% (8.6%) 7.3% 2Q98 12.5% 6.6% 4.5% (1.8%) 1Q98 27.6% 15.6% 3.6% 26.6% 4Q97 (1.2%) 2.5% (3.2%) 8.3% 3Q97 15.4% 14.3% 5.5% (5.4%) 2Q97 18.9% 16.6% (5.3%) 49.7% 1Q97 4.4% 1.9% 3.1% 14.5% Estimated. Figures in parentheses represent declines. Source: Census Bureau, Bureau of Economic Analysis. The durable goods release contains a series called nondefense capital goods shipments excluding aircraft (or NDCGSEA). This is what's used to approximate All Else; then the BEA* combines that with plain old aircraft and motor vehicles to produce the PDE portion of GDP. Cool? Two notes. During the first quarter of the year NDCGSEA fell for the first time since the third quarter of 1991. This, alongside sorry vehicles and aircraft performances, produces a rare triple-whammy. (Refer to the table and note that during the past two years, not even two components of business investment have posted decreases during the same quarter.) So, when the GDP report is released on Friday, no one should be surprised to learn that PDE softened between the fourth quarter and the first. (Technical note: PDE will not necessarily end up subtracting from the growth rate published Friday. Why? Because the numbers we've been discussing here are "nominal" ones, not "real" ones; that is to say, they haven't been adjusted for inflation. Recall that a real variable equals its nominal counterpart divided by the appropriate price level. Then note that if the prices and shipments of business investment goods both fall, but prices fall faster, then shipments will actually show an increase on a real basis; this is the basis on which GDP numbers are reported. So, depending on what BEA has prices for business investment goods doing during the first quarter, anything is possible.) That development will, just as it did during the fourth quarter of 1997 and again during the third quarter of 1998 (see table), prompt some economic forecasters and analysts to conclude that the investment boom is ending. And, as was the case in both 1997 and 1998, the call is again likely to prove premature. Why? Because orders during one quarter usually mean shipments the next, and orders for nondefense capital goods excluding aircraft jumped 13.7% during the first quarter. That, plus the fact that the NAPM new orders index rose markedly and steadily between December and March, suggests that business investment isn't dying. Anyway. I wrote this column for two reasons. The first was to illustrate (or try, anyway) how an ordinary economic release like the durable goods report fits into the overall growth picture. Releases like this may not always seem useful, but they are; there's a method to the madness. The second was to give you an alternative to all the crap you read and hear about a release like durables. The volume of just-plain-stupid comments that come in the wake of a release like this is staggering. All kinds of people who have no business at all weighing in on what durables do and don't mean -- people who have never even once actually looked at the source data -- draw all kinds of idiotic conclusions that simply aren't true. And one ought to be aware that it's precisely such "analysis" that gets people quoted in the press. __________________________________________________________________ Regards, Lee