January 30, 2013

4Q12 Gross Domestic Product Growth (013013): An Annualized Contraction of 0.1%

Filed under: Economy,Taxes & Government — Tom @ 8:22 am

We get our first look at how the economy really performed during the fourth quarter of 2012 today, as opposed to how it was presented in the runup to November’s general election and its aftermath.

The Associated Press just yesterday finally acknowledged that the economic consensus for today’s report is that it will show annualized growth of about 1%.

Here’s what I see in a last-minute review:

  • Bloomberg has 1.1%.
  • So does Reuters (“U.S. growth seen braking as inventories, government weigh”).

I’m rooting for an upside surprise showing genuine strength despite Obama administration obstruction, but fearful that we’ll see a downside shocker.

The report will be here at 8:30 a.m.

… Here’s that downside shocker (full release and tables):


Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 0.1 percent in the fourth quarter of 2012 (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 3.1 percent.

… The decrease in real GDP in the fourth quarter primarily reflected negative contributions from private inventory investment, federal government spending, and exports that were partly offset by positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.

The downturn in real GDP in the fourth quarter primarily reflected downturns in private inventory investment, in federal government spending, in exports, and in state and local government spending that were partly offset by an upturn in nonresidential fixed investment, a larger decrease in imports, and an acceleration in PCE.

… The change in real private inventories subtracted 1.27 percentage points from the fourth-quarter change in real GDP after adding 0.73 percentage point to the third-quarter change. Private businesses increased inventories $20.0 billion in the fourth quarter, following increases of $60.3 billion in the third and $41.4 billion in the second.

The press excuses will probably be:

  • “No big deal. It all had to do with inventories” — as if we’re supposed to be impressed with just over 1% growth if you ignore the inventory situation — which you can’t.
  • “See what happens when cut government spending?” There’s a difference between government “spending” and “purchases and investment,” which the press either refuses to acknowledge or doesn’t understand. “Spending” has not decreased, even if purchases and investment have.

This is just awful. More later if I find anything else worthy of comment or others’ comments worthy of note.


UPDATE, 8:45 a.m.: Also expect undue attention to ADP’s Employment Report released earlier this morning which showed 192,000 private-sector jobs added so as to distract from the GDP report. That’s not bad, but as Zero Hedge points out, ADP’s track record vs. the government’s reports has been “lousy,” and the firm reduced last month’s private-sector additions by 30,000 from 215,000 to 185,000.



  1. This bad even with all the extra guns that were sold. And they aren’t cheap. Not to mention the special dividends paid early. Those will dry up in 2013 along with the tax increases and increased govt borrowing its back to recession. I doubt I’m the first to predict a 2013 recession but I will anyway.

    Comment by Scott Landmann — January 30, 2013 @ 8:53 am

  2. “This bad even with all the extra guns that were sold. And they aren’t cheap.”

    That’s the comment of the day.

    I’m guessing that the next two revisions will move it back to slightly positive (maybe they underestimated gun purchases – LOL), but the tax increases, ObamaCare, and other overhang could very well move things into the negative after that.

    And what a great time for Shamnesty! Zheesh.

    Comment by Tom — January 30, 2013 @ 9:47 am

  3. Two comments:

    - The only government spending that was cut was defense spending.
    - The implied 4Q inflation rate of 0.6% – ((4QNGDP/4QRGDP)/(3QNGDP/3QRDGP))^4 – seems awfully low, and conveniently so.

    Comment by steveegg — January 30, 2013 @ 11:00 am

  4. yeap, that’s an I told you so that is long over due.

    How many times did I point out prior to November 2012, the economy was going into recession? All the signs were there, I kept pointing. This would be a good point to review the Great Depression GDP figures from 1927 to 1940.

    Comment by dscott — January 30, 2013 @ 11:34 am

  5. Shamnesty will be dropped during the ensuing hand wringing over the economy.

    BTW- the libs have been ginning up the idea that automation has reached a point that high unemployment will be a given from here on out. It’s not Obama’s fault, its those darn ATMs. The Bush card has been used up, now it’s time to pin the tail on another donkey.

    Comment by dscott — January 30, 2013 @ 11:37 am

  6. An excellent point:

    $312 Billion In Debt “Adds” Negative $5 Billion In GDP


    Since government borrowing accounted for a significant share of any meager quarterly economic activity ( most of which is money injected by the Fed via it’s purchases of Treasuries) at which point does one concede that merely spending money does not create GDP. At some point you got to make “stuff”.

    I doubt any expansion of exports is going to cover losses like this. Europe is doing terribly and China not far behind so don’t count on them to buy our stuff. BTW-Whatever happened to the US being the economic engine of the world?

    At what does Obama concede his economic policies have failed? Probably never.

    Comment by dscott — January 30, 2013 @ 12:16 pm

  7. Tea Party Founder Rick Santelli Blows his Top – When you act like Europe, you get growth rates like Europe


    someone is suggesting another stimulus as in tax cuts…

    Comment by dscott — January 30, 2013 @ 12:48 pm

  8. dscott, my column at PJM today is about that automation meme.

    Comment by Tom — January 30, 2013 @ 1:26 pm

  9. But I thought happy days were here again???

    Anyway, another excuse is that the supposed “GOP threat” of sequestration caused it. Odd, since a) sequestration was a White House proposal and b) the “threat” has been there for a while now, it’s all of a sudden causing contraction and/or slowing growth?

    Also, I think there is a chance future revisions will move the number slightly *lower.*

    Comment by zf — January 30, 2013 @ 7:37 pm

  10. [...] 2012, was posted at my home blog. A mere 23 minutes after the report’s release, my commenter noted with mock surprise: “This bad even with all the extra guns that were sold. And they aren’t [...]

    Pingback by BizzyBlog — January 31, 2013 @ 7:46 am

  11. Here’s a reasonable theory regarding the disparity between the 3rd and 4th quarters in GDP performance;

    Hunkering down for Term 2, GDP Edition


    To all the realists out there, how do we go from 3.1% real GDP growth in the third quarter to 0.1% real GDP decline in the fourth quarter? How do things change so quickly?

    Don’t go all conspiracy theory on me. Assuming the numbers are real, are people just hunkering down for term 2?

    That would be consistent with my theory back in October that hope that Romney might win was lifting the nation’s economic mood, Unexpected jump in consumer sentiment coincides with polls showing Obama could lose.

    In other words, we the makers who were hopeful of a Romney win, when he lost, we the makers who do the bulk of the economic activity pulled back and settled in for the long haul (back to going Galt). The makers clearly have a greater economic impact with our spending decisions than the takers who are scraping by on hand outs. This would be a reasonable alternative explanation to the conspiracy theory that the government fudged the numbers initially to later correct the misinformation after the election was done so the bad news couldn’t be used against Obama.

    I believe there is some truth to that conspiracy theory but one must ask if the bureaucrats were so willing to fudge the numbers at the beginning, why bother correcting it later when the propaganda value would be lost for later use? Why bother to lie and not keep lying? I suppose one could argue that fudging the numbers is a sign of compromised ethics but also a sign of guilt made right later by telling the truth after the fact to retain a semblance of credibility for the next well timed misinformation campaign.

    Comment by dscott — January 31, 2013 @ 7:47 am

  12. #11, IIRC, GDP was revised up from 2.5 (Oct.) to 2.7 (Nov.) to 3.1. That said, I think the hunker-down theory is a good one, because I believe that’s EXACTLY why the economy deteriorated at warp speed between Obama’s first election and inauguration (smart people already had started hunkering down in May-June 2008 in reaction to Pelosi-Obama-Reid’s plans — hence the POR economy — but those who didn’t get it initially certainly understood in after Obama won).

    Comment by Tom — January 31, 2013 @ 8:17 am

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