Same Number; Two Takes

So according to the just-released report, U.S. GDP “surged” to 2.7% during the third quarter.  Tyler Durden, over at Zero Hedge, takes a hard look at it.  As it turns out, the devil is in the details, and in the case of this particular report the devil is extra special evil this time around.

Some 70% of the U.S. economy is driven by consumers’ personal consumption.  How did that do, in terms of annual growth?  Oh . . . ummmm . . . that grew by a whacking 1.4% quarter-on-quarter (it had been expected to come in 1.9%, so it was actually 26% lower than expected on a quarter-on-quarter basis), and 0.99% annual (it had been expected at 1.42%, over 30% lower than expected), thereby accounting for 36% of the gross “growth” number.  That’s reassuring.  It gets better of course; it always does.  Fully two-thirds of the annualized growth was accounted for by government spending (not omitting to recall that at the federal level we’re inventing $0.40 of every dollar we spend out of thin air, that “money” coming 91% from “loans” from the Ben Bernanke’s Fed to the Treasury).  Another 30% was accounted for by inventory growth.  Errrmmmm . . . I’m no finance wizard, but when your inventories are ballooning it tells me you’re not selling.  When you’re not selling you’re not making money; in fact, if you’re like most businesses I’ve been exposed to your inventories are financed, either from your seller or from a third party (or some combination of both).  So my question is what proportion of that growth in inventory is going to turn out to be deadweight?  And CapEx, fixed investments, a decent measure of how businesses are intending to behave?  How did that do?  It accounted for all of 0.1% of the “growth.”

Durden predicts, “‘A stunning success,’ the administration sycophants would say.”  I don’t think we need both checking in with the NYT, WaPo, and Dear Leader’s other campaign operatives.  But let’s see what my dear lads over at the FAZ have to allow.  “America’s Economy Doubles Its Growth Rate” is the headline.  They note the upward revision from the Q3 estimate of 2.0%.  The also note that fixed investment has fallen, for the first time since last year.  To what does the FAZ attribute the growth?  Is there a mention that 67% of it is accounted for by government spending?  Well . . . actually, no.  The growth is attributed to increase in exports and residential construction.  They say nothing about the numbers reported in this article from Reuters, by which new-home sales are softening, as resales continue to grow, somewhat.

The FAZ reports rosy forecasts of 2.0% annual growth in 2013 and 2.8% in 2014.  Tyler Durden is not so confident.  We’ll see who turns out to be right.

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