The most important number in today’s Q4 GDP update was 2.3%. That’s the year/year change in real final sales from Q4 2013. As an analytical matter it means that the Great Slog continues with no sign of acceleration whatsoever.
Indeed, the statistical truth of the matter is that this year’s result amounted to a slight deceleration – – since the Y/Y gain in real final sales for Q4 2013 was 2.6%. But beyond the decimal point variation the larger point is this: Take out the somewhat jerky quarterly impacts of inventory stocking and destocking, and view things on a year/year basis to eliminate seasonal maladjustments and data collection and timing quirks, such as the double digit gain in defense spending during Q3 and the negative rate for Q4, and what you get is a straight line slog since the recession ended in 2009.
Thus, the year/year gain in real final sales for Q4 2012 was 2.1%; and was 1.5% and 2.0% for the years ended in Q4 2011 and 2010, respectively. Its a 2% world. Period.
The questions thus recurs as to what in the world the Fed’s massive money printing spree had to do with this tepid performance. The answer is nothing at all, and that ‘tepid’ and ‘slog’ are exactly the right words to characterize these numbers. After all, the plunge in GDP during 2008 and the first half of 2009 was the deepest since WW II. By all prior norms, therefore, the bounce back should have been exceptionally strong.
For instance, real final sales dropped by 3% during the Great Recession – – far more than the 1.1% decline during the deepest prior post-war downturn of 1981-1982. However, during the next five years of rebound, real final sales grew by 26% or nearly 4.7% per year. That’s more than triple the 8% cumulative rebound from a far deeper hole in June 2009.
This post was published at David Stockmans Contra Corner by David Stockman ‘ February 27, 2015.
Recent Comments