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Hunkering down for Term 2, GDP Edition

Hunkering down for Term 2, GDP Edition

Remember the cheery pre-election economic news?

That was then, this is now.

From the Bureau of Economic Analysis, the third quarter boom-boom days have turned into the fourth quarter bust:

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 Bureau emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4 and the “Comparisons of Revisions to GDP” on page 5).  The “second” estimate for the fourth quarter, based on more complete data, will be released on February 28, 2013.

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.

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.

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Comments

“…are people just hunkering down for term 2?”

Yes, in a word.

As noted here many times before, uncertainty is a killer of entrepreneurial economic activity, and the Obamic Decline spins off uncertainty like a haunted cotton-candy machine in a Steven King novel.

Perhaps because they have become all too common, a series of mass lay-offs have gone all-but ignored in recent weeks.

It WILL continue this way.

    Not to worry …
    Dems: ‘Best-Looking Contraction in U.S. GDP You’ll Ever See’…

    jakee308 in reply to Ragspierre. | January 30, 2013 at 11:35 am

    “haunted cotton-candy machine in a Steven King novel.”

    Now THAT paints a picture.

    Well done.

    Part of it is the mass layoffs that Rags mentioned above. This trend will actually accelerate as full Obamacare implementation comes online and companies either dump their health care plans entirely and choose to pay the “taxes” or restructure and dump employees to get under the threshold.

    Part of it is that the Obama Bureau of Labor Statistics worked hard to make the numbers “look” better in the 3rd quarter in order to help Obama’s reelection campaign by allowing him to say “it’s working” and to help him make the reduction look better when Obama blamed the Republicans for the “Fiscal Cliff” talks by forcing through “cuts.” Remember the “unemployment” numbers based almost entirely off of the “home survey” and not actual employer’s reports which showed hiring of, what was it, 700,000 people in one month as an adjustment?

    Some of it is just timing. Q4 is always a bit weak, because of the amount of vacation time included in it. This year, with Halloween on a Wednesday, that probably drove down productivity for the remainder of that week. Then there’s Thanksgiving, where lots of manufacturers are actually closed for a week, and Christmas & New Years Day (both Tuesdays) which also closed a lot of manufacturing plants for 7 to 8 days.

    Some of it was optimism that Romney would win; that the people couldn’t possibly be stupid enough to return Obama to the Presidency after the damage done to the economy on his watch. But never underestimate the stupidity of a group of Liberals and their ability to ignore facts and reality in search of Utopianism.

    Finally, part of it is that the public actually IS pulling back on purchases in expectation of an actual partial government shutdown. The expect that the Senate is going to continue to refuse to pass a Budget, and that the House is going to finally stand up and say “no more spending” without one. The House TEA Partiers really need to use this one, as the “entitlements” will still take care of themselves.

“To all the realists…”

Realists, optimists, pessimists, etc., are all getting their butts whipped by the Opportunist, Barack Obama.

No conspiracy required, business as usual suffices. The Bureau of Economic Analysis is part of the US Dept of Commerce. Does the Obama administration have any record of manipulating data to its own purposes?

    U.S. Economy Unexpectedly Contracts in Fourth Quarter

    ” Unexpectedly” oh please.

    Living is easy with eyes closed, misunderstanding all you see.
    It’s getting hard to be someone but it all works out,
    What difference at this point does it make?

We are hunkering down big time for 2013. No vacations planned. Much less spontaneous spending. Stashing away every extra penny. Told all four (adult) kids to do the same. Save. Save. Save.

MSNBC this morning sang the praises of the Obama economy, giving him all the credit for the stock market rise, housing, and investor confidence. Of course, that was before this announcement came out. Now on that channel? Crickets.

The stock market will go up, because as somebody pointed out: compared to the rest-of-the-world, the US is still a safer place to put your money. The ‘good’ news is, there’s a lot of corruption in China, and they didn’t go to all that work stealing all that money just to have France tax it away at 75%.

But other than that – jobs for the next four years will migrate out of the US, or else within the US. It’s going to be VERY interesting to compare Texas v. California in 2016.

I often wonder how many jobs would move to Canada if their immigration laws were easier.

    huskers-for-palin in reply to radiofreeca. | January 30, 2013 at 11:45 am

    I would love to see the 2020 Census results and watch how many congressional seats/EVs go from blue states to red states.

I blame George Booosh

I agree with that theory since my optimism was high that Romney would win and we all could get back to normal. I had such great plans of buying property and building a house. All of that dashed at Obama’s election since without any hope of economic rebound, ObamaCare stays in place, the EPA will run rampant and regulations will multiple to strangle business activity, thus full time jobs will not be created and if you don’t have a job you can’t buy a house since you can’t pay a mortgage. If no one can buy a house then clearly I can’t sell mine.

So there we stand, four more years of sideways economic activity patiently waiting for 2016 when hopefully the majority will finally get sick and tired of liberal incompetence and meddling in things they have absolutely no clue.

Paychecks are contracting and so is the overall economy. Wait till Obamacare does us in.

When we decline down to a GDP of 0% we will be left with only piles of tax forms, bankrupt green energy companies and Obama’s golf bag.

Now, will I be able to right off the following loss for 2012 or 2013?:

http://www.foxnews.com/politics/2013/01/30/watchdog-says-taxpayers-may-lose-27b-in-bailout/

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?

Change in government spending. In Q2 we had 1.5% GDP growth that shot up to 3.1% in Q3 largely due to an increase in government spending (especially defense, anticipating the sequester). In Q4 a lot of that spike in spending was pared back.

Can’t buy consumer goods when you’re panic buying guns and ammunition.

Consider the run on ammo and guns to be the first in a succession of panic buying/hoarding that will occur as the dollar erodes in value.

As I understand it that’s the stage that every country that has experienced the devaluation of their currency goes through.

People buy ANYTHING at anytime offered in the hopes of trading it later for something they might really need.

I think that’s what has happened with ammo and guns. Their are people buying up the stocks purely as an investment in real goods for later sale at inflated prices to make up for the currency devaluation.

I recommend that folks explore the ramifications and the strategies involved because Helicopter Ben can only keep interest rates low for so long.

Eventually buyers won’t buy unless they can get something in return. So far we’ve avoided that as we’re considered a safer place to put their money than the other options/countries.

That safe haven is eroding as we speak.

Don’t look to the stock exchange as any indication of actual economic and fiscal security or future improvements.

Don’t buy gold, buy flour, sugar, other commodities that store well or can store well. You’ll be glad you did.

I havent read all the granular detail but Im expecting Paul Krugman’s typical reply “See what happens when government doesn’t spend enough?”…”if we had just “invested more money..why the economy would be bearing the fruit of government spending” (as if all government spending is somehow “magic” and sure to return many times the initial spending).

Well? Our friends at Zerohedge ask a simple question:
Why didnt we get any bang for these bucks?

http://www.zerohedge.com/news/2013-01-30/chart-quarter-312-billion-debt-adds-negative-5-billion-gdp

The thing here is that it is clear to me that the administration was cooking the books prior to the election.

That along with free stuff, Republican indifference made the difference.

Now we reap what the “majority” has sown…

Unexpected drop in GDP? Unexpected permanent loss in employment? Unexpected loss in confidence?

It’s all Bush’s fault. Oh, wait.
It’s all Europe’s fault. Oh, that doesn’t work, either.

Racists.

Seriously, though, elections have consequences.
Remember all those stupid people who voted for this regime without thinking about the economics or the long term consequences (or reality)?

Well, they are about to get an education.

It’s tough to pay for all that free stuff when the economy sinks.

    agecon in reply to kevino. | January 30, 2013 at 1:54 pm

    “Remember all those stupid people…”. Colin Powell said yesterday at the “the factor” that he voted for Obama, because he had more faith in his economic policies than in those of his opponents!

Makes sense. The election result gave no reason to expect economic growth, plenty of reasons to expect more hard times.

And dont buy the Pilot Fish Media reporting

Federal outlays by quarter:

1st: 966,188

2nd: 884,957

3rd: 809,969

4th: 907,912

    Well, then disregard my previous comment. I had read that government spending was the main driver of this change on a reliable site. I suppose they must have gotten the numbers from some other left-leaning site.

    I was trying to verify the quarterly outlays, but couldn’t find raw data anywhere.

    Thanks again!

I disagree with the idea that uncertainty undermines the economy. I was certain enough of the economic near future in spring of 2012 to sell off all but one of my clinics, a move that saved my financial ass.

There is no uncertainty. Our economic future is bleak.

    Henry Hawkins in reply to Henry Hawkins. | January 30, 2013 at 12:39 pm

    Addendum: Uncertainty IS detrimental if it is true uncertainty, my point being that it is no longer uncertain – the future is certain to be bad.

Nothing to worry about! Make the “millionaire and billionaires pay a little bit more.” Throw-in some SSM, open borders, “assault weapon” banning, birth control pills and problem solved! You people worry too much! This is just a hurricane hiccup!

    Henry Hawkins in reply to jacksonjay. | January 30, 2013 at 12:40 pm

    Yes, and the gubbbermint is finally tackling our biggest problem – doping in professional sports.

      jimzinsocal in reply to Henry Hawkins. | January 30, 2013 at 12:46 pm

      Bigtime. Agenda: Demonize any sort of leaders that arent part of “Government”

      Business/ owners (Gibson Guitar/Apple the slave traders/Boeing yanking food from union mouths)
      Sports figures other than Obama “friends”
      News Organizations that dont agree
      Historical figures that dont accept Marxist beliefs

Remember Shirley Ellis and “The Name Game”?

Sandy! Sandy! fo fanny GDP really really bad baddy … fee fi mo mandy, Sandy!

Come on everybody! Now let’s play a blame game!

White House: Sandy to Blame for Lack of Growth.

Obama as Harold Macmillan:

“Storms, dear boy, and tsunamis.”

MaggotAtBroadAndWall | January 30, 2013 at 12:55 pm

After the election, the S&P went straight down until Nov. 16th. That was the day Obama had a pow-wow with leaders of both parties and both houses and they all emerged from the meeting saying they would work to find a way to avoid going over the fiscal cliff. Until that day, I think investors and business people believed that Republicans in the House would play hardball and that a recession may follow. The market has gone straight up since Nov. 16. I think they believe the recession scenario is now off the table.

At least judging by the stock market, 4Q GDP was likely a one-off fluke.

The highly cyclical consumer sectors of the economy – housing and auto production – are still recovering. Light vehicle production troughed at about 9 million SAAR units back in the dark days of late ’08 and early ’09. The run rate in November was up to about 15 million SAAR units. The cyclical peak was about 17 million units, but that was juiced by people drawing down home equity lines and 2nd mortgages on inflated home values prior to the bust.

Housing starts troughed at less than 400,000 units in ’09, and those are back to about 900,000 (though still way off from the phony boom numbers of about 1.5 million housing starts annually in ’06).

The regulatory and tax drag created by Obama’s policies should keep growth well below post WWII averages, but in the absence of an unforeseen geopolitical shock it’s hard for me to get too pessimistic about a new recession with the cyclical industries still expanding and so much excess capacity in the economy.

I once calculated the difference in GDP if growth were 4% per year for 10 years if Newt’s pro-growth policies were enacted and compared it to Obama’s expected growth of 2%. Starting from a base of a $16 trillion economy, the difference those growth rates is $320 billion in GDP per year. So over 10 years, that’s $3.2 trillion in additional economic output we could have had but won’t if my assumptions are in the ball park. So that’s your opportunity cost. About $3 trillion in unrealized prosperity and several million fewer jobs over 10 years.

But hey, we got a guy who can sing like Al Green. So we’ve got that going for us.

    This is the beauty of the internet. Cogent analysis from someone whose voice wouldn’t be heard otherwise.

    “But hey, we got a guy who can sing like Al Green. So we’ve got that going for us.”

    And a flourish good for a laugh that a “real” (haha!) journ-o-list would not be allowed to add.

    It’s great to read the opinions and analyses of people who have deep knowledge in areas where they work or have keen hobbyist interest.

    Compared to the inch-deep knowledge displayed by journalists, who are really little more than glorified English majors, I’ll choose the insights of a Maggot over a J-school pompous ass just about any day.

Subotai Bahadur | January 30, 2013 at 2:24 pm

It does not require a tinfoil hat to assume that the economic figures are massaged to GOSPLAN levels.

We have seen the unemployment figures redefined beyond belief. Between seasonal adjustments, regularly not counting entire states, and changing the definitions of unemployed so that people are taken out of the labor force, and therefore not employed [we officially have an unemployment rate of 7.8%, but we have the smallest percentage of our working age population in the labor force in decades; app. 63% at the time of Obama’s election to app. 58% today ]. If we measured unemployment the way we did during G.W. Bush’s terms, we would be at 12-15%. If we measured it the way we did during Carter’s years, we would be at 13-16%.

They have changed the “basket” used to measure inflation so that food and energy costs are not counted, and housing costs are emphasized. The collapse of the housing market therefore helps the inflation figures as if everyone bought a house every month. Official inflation for 2012 is 2.07%

If you go to a store, you know it is … bovine end product. Grocery bills have gone up 25-30% in 2007, especially when you count shrinking packaging. Energy costs are soaring [aggravated by coal fueled power plants being shut down, and “smart energy” boondoggles]. But according to the official figures, everything is hunky + dory squared.

And this affects the GDP figures. We are citing “real” GDP. That is defined as gross increase in GDP over a set time span, MINUS the inflation rate for the time span. If inflation is defined down, the “real GDP” gets larger.

This has been going on for 4 years. The true baseline for the economy is FAR lower than stated, and the current figures are far lower than stated. We joke about the “recovery summers” but in fact we have not gotten out of recession as claimed, and it can be argued that we are in what is a Depression as defined when a Leftist is not in office.

The Stimulus/Quantitive Easing just add to the inflation rate.

There is NOTHING promising on the economic horizon. There are a lot of economic headwinds [hurricane level] that anyone can see.

And when looking at the stock market, keep in mind that the volume of shares traded have plummeted during this regime as small investors either bail out, or have been wiped out. What is left is largely institutional investors, connected to the regime, and operating by computer algorithms that have not relationship to the real economy.

jakee308 | January 30, 2013 at 11:32 am is right. Much purchasing beyond necessities is driven by attempts to prepare for a nasty future.

Subotai Bahadur

    Pavo Real in reply to Subotai Bahadur. | January 30, 2013 at 5:20 pm

    EXACTLY!
    Every word of this. It drives me bananas to hear anyone use GDP, unemployment rates, the stock market, inflation, etc. etc. as if any of these highly manipulated metrics were providing factual data. I wish I could take what you wrote and jam it into the brains of anyone who bases an argument on any of these figures. GOSPLAN is right!

Henry Hawkins | January 30, 2013 at 3:20 pm

The biggest problem facing my business is that my services, though necessary to the client, are not as necessary as food, shelter, and clothing, that is, too many Americans are forced to prioritize which bills they’ll pay each month because they cannot pay them all. Those businesses whose products and/or services are important, but less so than groceries, mortgage/rent, electric bill, etc., are suffering accordingly.

Not so long ago (five years, ahem) I’d get an initial call and request for info, and clients followed up within two weeks or so or not at all. Now, after that first call when costs and schedules are laid out, less clients are responding at all, and those that do are taking weeks and months to do it. Unemployment in my local area is about 15% and rising. (unemployment during the Great Depression ranged from 15%-25%). Luckily, my client base is national due to the ability to provide services remotely, but my clients are still stuck with the national unemployment rate and a bleak outlook for the future.

My new business model is “spend not one dime unnecessarily”.

    snopercod in reply to Henry Hawkins. | January 30, 2013 at 4:49 pm

    “spend not one dime unnecessarily”…

    For a demonstration of that maxim, visit an Aldi store on the 4th Wednesday of the month when many SS checks come out. It’s like a bumper car demolition derby for the geriatric set.

      Henry Hawkins in reply to snopercod. | January 30, 2013 at 5:12 pm

      Man, I must live in the boonies of North Cackalacky. I had to look up ‘Aldi Store’. Never heard of ’em!

      lol

“Assuming the numbers are real…”There’s your problem right there.

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