4Q09 GDP Post (012910): Advance Estimate Comes in at Annualized +5.7% (See Update 2: A ‘Windows 7 Recovery’?)
Well, here comes the report that, if it comes in as predicted, will bring out Obamanomics’ defenders in droves.
An AP report I saw yesterday that I can’t find the link to immediately predicted that the government will report that economic growth during the fourth quarter of 2009 was an annualized 4.5%. This Reuters link has a consensus prediction of 4.6%.
We’ll see right here very shortly.
8:34 a.m. — Here we go:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 5.7 percent in the fourth quarter of 2009, (that is, from the third quarter to the fourth quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.2 percent.
Immediate reax: This administration has done what most would have seen as the impossible — creating an environment where the economy grows and jobs are still lost, i.e., not a jobless recovery, a “job-loss recovery.”
Second reax: That number is extremely likely to come down in subsequent revisions. There are so many tepid (or worse) reports coming from elsewhere, including the ones from Uncle Sam telling us that the money one would expect to be coming into the government as a result of strong growth isn’t coming in.
Third reax: As good as the 5.7% number is, it still trails Bush 43′s breakout quarter of 6.9% after the supply-side investment-related tax cuts that he wanted all along finally happened in 2003.
Fourth reax: As good as the number is, it only bring us just over halfway back (before considering population growth) to where we were before the POR (Pelosi-Obama-Reid) Economy kicked in (results are compounded and carried out to more decimal places than displayed):
Since Pelosi, Obama, and Reid own the results of all six quarters (the POR Economy’s arrival came in the summer of 2008), this represents the full context of their awful stewardship.
More later.
UPDATE: There’s a big difference between what was produced and what was sold, as this paragraph from the government’s report shows:
Real final sales of domestic product — GDP less change in private inventories — increased 2.2 percent in the fourth quarter, compared with an increase of 1.5 percent in the third.
AP has picked up on that point with its current opening paragraph:
The economy grew faster than expected at the end of last year, though the engine of that growth – companies replenishing stockpiles – is likely to weaken as consumers keep a lid on spending.
The thing to really be concerned about is that companies might have overdone it on the replenishment.
UPDATE 2: The AP report also cites something I referred to several months ago (third item at link) as one of the economy’s best hopes for a legitimate, private industry-driven breakout:
Growth exceeded expectations mainly because business spending on equipment and software jumped 13.3 percent – much more than forecast. It’s the second quarter in a row that business spending has increased, after six quarters of decline.
From the government’s long-form report – “Information processing and software” was a 0.60% component (Table 2) of the 5.7% the reported GDP increase — a remarkable percentage of total growth (10.5%, or .6/5.7; also 27%, or .6/2.2, of the final sales growth rendition of GDP) considering that it’s about 4.4% of the economy (Table 3: $578 billion divided by $13.155 trillion).
Especially considering the potential productivity improvements throughout the economy of widespread Windows 7 adoption after 3 years of business misery with and avoidance of Vista (and assuming that Windows 7 is as good as reviewers have said it is), if the recovery ends up having longer-term legs, we may need to start calling it the “Windows 7 Recovery.”
Apple’s fourth quarter results earlier this week, which included a 33% increase in sales of Macs, indicate that it also has had a role in the sector’s outsized contribution to growth.
Should I mention that computers and software are among the few sectors the government hasn’t been particularly successful at heavily regulating–yet?
I wonder how much of the GDP is due to private investment?
Comment by Alo Konsen — January 29, 2010 @ 9:01 am
That’s part of “more later.”
Comment by TBlumer — January 29, 2010 @ 9:14 am
We need a post on political business cycles– “A business cycle that results primarily from the manipulation of policy tools (fiscal policy, monetary policy) by incumbent politicians hoping to stimulate the economy just prior to an election and thereby greatly improve their own and their party’s reelection chances. Expansionary monetary and fiscal policies have politically popular consequences in the short run (tax cuts, falling unemployment, falling interest rates, new government spending on services for special interests, etc.). Unfortunately these very policies, especially if pursued to excess, can also have very unpleasant consequences in the longer term (accelerating inflation, an unsustainably low rate of savings to support future investment, damage to the foreign trade balance, long-term expansion of government’s share of the GNP at the expense of people’s disposable incomes, etc.). So immediately after the election is over (and the next election is far away), politicians tend to “bite the bullet” and reverse course by raising taxes, cutting spending, slowing the growth of the money supply, allowing interest rates to rise, etc. Thus the regular holding of elections tends to produce a boom-and-bust pattern in the economy because of the on-again-off-again pattern of government stimulus and restraint encouraged by trying to schedule an artificial boom at every election time.”
- A Glossary of Political Economy Terms ( http://www.auburn.edu/~johnspm/gloss/political_business_cycle )
I first exposed the strategy here (Feb. 28, 2009) on Newsbusters: http://newsbusters.org/blogs/nb-staff/2009/02/28/open-thread#comment-863930 .
And on BizzyBlog here (March 26, 2009): http://www.bizzyblog.com/?comments_popup=8198#comment-136882
Comment by Joe C. — January 29, 2010 @ 10:22 am
#3, great comment and lookback.
This is why people need to be reminded that we’re barely halfway back from what they did to us.
The strategy of making 2010 look good in time for the elections and causing 2011 to be awful was cited a day or so ago by dscott who found something related that Laffer wrote.
It could happen, but there are quite a few obstacles (not in any particular order):
- Unemployment may not come down much if at all.
- Fred and Fan continue to hemorrhage.
- Three car cos may be in serious trouble (GM, Chrysler, and maybe Toyota if the recall seriously hurts their reputation).
- The rest of the world could lose its appetite for our trillions in new debt at any given moment.
- The administration won’t let the uncertainty subside but is instead ratcheting it up with bank bashing and its proposed Bill of Attainder bank tax.
Comment by TBlumer — January 29, 2010 @ 10:34 am
Just a thought? Could Apple’s new iPad be analogous to the advent of the Pentium chip and roll out of Windows 95 that sparked the “.com boom” of the ’90′s? It is the increased productivity and lower costs (i.e. shifting the supply and demand curves favorably) that I believe, along with the Conservative’s takeover of Congress from ’94-’98 and their subsequent policies co-opted by Clinton–e.g. spending cuts, Welfare reform, capital gains tax cut–that caused the prosperity of the ’90′s, and overcame the retarding effects of tax increases. Of course, the bubble burst when sound monetary policy and federal restraint couldn’t be sustained when the “Moderates” took over.
Just askin’.
Comment by Joe C. — January 29, 2010 @ 10:43 am
#5, Very good question on the iPad. We’ll have to see. Your points about the sources of growth in the 1990s are very underappreciated.
Comment by TBlumer — January 29, 2010 @ 10:46 am
@Site: Obama was sworn in as president in 2009. The forth quarter of 2008 — which is listed under Obama — was well underway before Obama was even elected. Let alone Q3! Bit dishonest counting their GDP losses wouldnt you say?
Comment by JSK — January 29, 2010 @ 10:48 am
#7, please educate yourself about the POR Economy’s origins, i.e., follow the links.
They created what others have started calling “The uncertainty economy” during the summer of 2008 — and I called it when it began to happen.
The Democratic Party also spent decades creating the conditions that led to Fan and Fred’s fall-aparts and took other actions that created Fall 2008′s crisis atmosphere.
It’s on them.
Comment by TBlumer — January 29, 2010 @ 10:51 am
Plus, Obama supported and/or voted for everything that led up to and caused the POR Recession from ACORN’s thuggery for the CRA all the way to giving a floor speech in support of TARP I and voting for it. AND, need I remind everyone that according to Obama’s campaign via John Kerry, TARP was all his idea ( http://www.bizzyblog.com/2009/03/13/record-shows-obama-was-on-board-tarp/ ). So trying to escape responsibility based on having been sworn in on Jan. 20, 2009 is a non sequitur.
Comment by Joe C. — January 29, 2010 @ 11:27 am
Folks, I wouldn’t be too cheery or even ambivalent about a “Windows 7″ recovery. Ask yourselves what is the purpose of companies upgrading their computer software when the existing software and hardware was doing it’s job???? Isn’t the purpose of computers in business to minimize the number of PEOPLE needed to perform a task? I.E. doing more with LESS…
Yeah Tom, that would be a job-loss recovery.
Comment by dscott — January 29, 2010 @ 5:10 pm
#10, yeah but that’s supposed to be what the creative destruction thing is all about.
Trouble is, you have to have entrepreneur-inventor-investor-risk taker types willing to jump in and create, deploy, and sell the new things and to create the new markets that never existed before. POR (and SARBOX and the SEC) have thrown up a lot of barriers to that.
So absent the substitutes, extensions, etc. your concern that Win 7 might lead to cost-cutting and employment drops and not to longer-term economic growth is nothing to sneeze at.
Plus the effect on U.S. employment of HP, Toshiba, Lenovo, Dell, and others being successful thanks to Win 7 may not be that great.
Comment by TBlumer — January 29, 2010 @ 7:23 pm
#11, automation (computers also) is frequently a double edged sword. Look at the auto makers, we discussed long ago prior to the POR recession and I linked an industry report stating the auto industry shed 30% of it’s work force over 10 years due to automation with no reduction in output. Now to be fair, the UAW screwed their members by demanding unsustainable wage increases which the gullible membership greedily took without considering the consequences. They deserved what they got for their greed, the unemployment line.
However, in the face of threatened increased labor costs due to health care and then the threatened increase in energy costs, businesses have to either cut something by a corresponding efficiency increase OR pass on the cost sparking INFLATION PSYCHOLOGY, just like in the 70′s with idiot Carter. I remember it well… Now haven’t we heard the mumblings of liberals complaining about the likes of Walmart keeping things cheap? IF this economy does take off I can’t see any other result than inflation, something has to give otherwise costs must rise. But I’m more inclined to believe Laffer than the propagandists who believe in the concept of “Animal Spirits.”
Personally, any increase in GDP, i.e. better economic performance than the previous quarter, is strictly a function of clearing out inventory and taking just in time stocking to the Nth degree. Which brings me to another interesting thought and question, many States have a kind of inventory tax or personal property tax that is calculated on the total gross assets (includes inventory) on hand at the end of the year. I wonder how that tax collection category faired?
Comment by dscott — January 29, 2010 @ 7:55 pm
Speaking of the technology led recovery, interesting comments from Bloomberg article:
http://www.bloomberg.com/apps/news?pid=20601087&sid=anrYWrdXcYok&pos=2
…concern over the outlook for technology company earnings overshadowed data showing the U.S. economy grew at the fastest pace in six years…
…The Standard & Poor’s 500 Index slid 1 percent to a three- month low of 1,073.87 at 4:30 p.m. in New York with technology shares sinking 2.1 percent as a group following earnings from Microsoft Corp. and SanDisk Corp…
… While both companies’ earnings topped the average analyst estimates in Bloomberg surveys, Microsoft slid 3.4 percent after saying it hasn’t seen a recovery in enterprise software spending and SanDisk tumbled 12 percent as its sales forecast trailed estimates…
All is not that rosey in Obamaland.
Comment by dscott — January 29, 2010 @ 8:46 pm
#13, MS had thought enterprise software might be turning just a couple of weeks ago. It would be really bad news if that’s not the case, meaning that Windows 7 is more an opportunity to get something/anything for a lot of users because XP is just so old.
I look for MS to try to push users away from XP in 18-24 months (maybe sooner, but I don’t the market will stand for it) by ceasing its support and telling PC and peripheral makers that they would be better off making their stuff work with 7 and Vista only. The people who are clinging to XP are legion.
Comment by TBlumer — January 29, 2010 @ 9:36 pm
I was reviewing instapundit’s sampling of interesting articles around the web and found this one:
http://www.washingtonexaminer.com/opinion/blogs/beltway-confidential/Obamas-2011-budget-will-include-phantom-cap-and-trade-revenue-83075057.html
The interesting part is NOT the phantom revenue, it’s in the comments section:
bobbieccc@hotmail.com
Jan 30, 2010
All these attacks on our energy will result with the consumer paying more and more.
The EPA’s ban on coal mining permits in 3 States….has already caused our electric bill to rise….
$142 last month to $386 this month!
There will be no money left for us to purchase anything, if Obama thinks the economy should be moving along….,he just stopped it!
This got me to searching to find the basis of this comment:
EPA to delay 79 coal mining permits
http://www.mnn.com/earth-matters/energy/stories/epa-to-delay-79-coal-mining-permits
Environmental groups including the Sierra Club and the Rainforest Action Committee want Obama to ban the practice, arguing it destroys ancient mountain peaks, fouls water and damages the culture of Appalachia.
Now how long has mountain top mining been going on in this country and somehow this also damages the CULTURE of Appalachia????? I must be grossly misinformed, I thought the culture of Appalachia revolved around coal mining??? So it seems Obama has been very busy trying to drive up the price of energy.
Comment by dscott — January 30, 2010 @ 11:02 am
#15, more ammo for those who believe that this admin doesn’t really want a legitimate economic recovery.
Comment by TBlumer — January 30, 2010 @ 11:24 am
[...] that equipment and software may save us (the “Windows 7 Recovery” cited at Update 2 in my Friday GDP post) based on this statement in a New York Times editorial: Much of the recent upsurge in business [...]
Pingback by BizzyBlog — January 31, 2010 @ 11:24 am
Here’s some context to your table:
http://www.calculatedriskblog.com/2010/01/real-gdp-declines-from-prior-peak.html
The Great Depression had a GDP contraction of around 10%, we have currently experienced nearly 4%, so far… with a possible double dip in the wings.
Comment by dscott — February 2, 2010 @ 1:48 am