February 25, 2011

Shhh: 4Q10 GDP Growth Revised Down From an Annualized +3.2% to +2.8%

Filed under: Economy,Taxes & Government — Tom @ 2:52 pm

Here’s the Associated Press at 7:09 a.m., ahead of the government’s revised fourth quarter 2010 Gross Domestic Product (GDP) report:

The economy probably grew a tad faster at the end of last year than first thought, helped by stronger sales of U.S. goods to foreign buyers and slightly more spending by businesses to add to their inventories.

Analysts predict the economy expanded at an annual rate of 3.3 percent in the October-December quarter. That’s slightly stronger than the 3.2 percent growth rate estimated a month ago.

Here’s Bloomberg, complete with its insufferably arrogant air of implied certainty (not to mention its complete failure to note that the rates involved are annualized):

Treasuries snapped a gain from yesterday before government and industry reports that economists said will show gross-domestic-product growth quickened and consumer confidence improved.

U.S. gross domestic product grew at a 3.3 percent rate in the fourth quarter, faster than the 3.2 percent pace the government estimated in January, according to a Bloomberg News survey of economists before the Commerce Department report today.

Here’s the government’s actual report released at 8:30 a.m. (bolds are mine):

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 2.8 percent in the fourth quarter of 2010, (that is, from the third quarter to the fourth quarter), according to the “second” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.6 percent.

… The small fourth-quarter acceleration in real GDP primarily reflected a sharp downturn in imports, an acceleration in PCE, an upturn in residential fixed investment, and an acceleration in exports that were mostly offset by downturns in private inventory investment and in federal government spending, a deceleration in nonresidential fixed investment, and a downturn in state and local government spending.

Oops.

Here’s how the AP covers the Obama administration’s keister:

  • As of 2:30 p.m. at the Business page, there isn’t even a news story about the GDP report.
  • Also as of 2:30 p.m., news about the government’s report is not findable if you search the AP’s home site on “GDP” or “gross domestic product.”
  • Jeannine Aversa’s 10:28 a.m. report (“State spending cuts slow US economic growth in Q4″) tells us that it’s the fault of reduced state and local government spending. C’mon, Jeannine, you have to know that’s a load of crap. Yes, the state/local contribution to GDP component went from an original -.10 to a -.29, but the headline says that these alleged state cuts were the main reason why overall growth wasn’t as good as expected, not why the revised number changed as it did.
  • Aversa’s opening sentence is also pure hyperbole: “Deeper spending cuts by state and local governments weighed down U.S. economic growth in the final three months of last year.” The main reason why overall growth is being held back remains “Gross Private Domestic Investment,” whose component, while declining a bit from -3.20 points to a revised -3.13, remains the single biggest deterrent — by a factor over 10 times greater than the impact of state and local spending. After flushing out the change in inventories (which are being kept lean because businesses aren’t confident that buyers are out there), fixed private investment declined from contributing 0.57 points to 0.50. In a real recovery, this category should be exploding. It also happens to be the place from which real future growth due to innovation and increases in productivity should be coming — and they’re not.

So I guess we’re supposed to believe that the economy is just gonna die if the states don’t keep spending recklessly. Zheesh.

As seen in this blog’s far right column, GDP growth during the sixth post-recession quarter under Ronald Reagan was an annualized 8.0%. Reagan, dragging many in his party kicking and screaming into doing what’s right, did what works; Obama and his party did exactly the wrong thing, won’t own up to it, and won’t stop trying to do what hasn’t worked, and won’t work.

It also should be noted, despite the downward revision, that the economy appears to have finally recovered in real terms from the POR (Pelosi-Obama-Reid) Economy’s recession. At this table, you’ll see that 4Q10′s real GDP of $13.3710 trillion is slightly above 2Q08′s $13.359 trillion. But if the final revision coming out at the end of March comes in at few tenths of a point lower, that will no longer be the case.

Of course, full recovery using the Warren Buffet standard, which says that you haven’t recovered until per capita GDP is back to where it was, remains far, far away.

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1 Comment

  1. Tangentially in the future all this owed money is going to cost more than they think.

    The Social Security Trust Fund May Be Worth Less Than Zero
    By Jed Graham

    http://blogs.investors.com/capitalhill/index.php/home/35-politicsinvesting/2479-the-social-security-trust-fund-may-be-worth-less-than-zero

    While SS is redeeming those special interest bonds to make up the difference between expenses and revenue the interest on the NEW bonds to cover the redemption of the old ones is going to be higher…I wonder if that little projection has been forecast in Obama’s 2012 budget?

    Comment by dscott — February 25, 2011 @ 8:24 pm

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