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Don't Get Too Excited About the GDP "Growth"

Recs

8

August 29, 2008 – Comments (4)

Since GDP figures go up when our imports drop... well, I'll let the Financial Times explain it:

  Stunned economists were forced to boost their  calculations of trade's contribution to US gross domestic  product earlier this month after surprisingly strong trade  data showed nominal US exports grew twice as fast as  imports in June, narrowing the trade deficit by 4.1 per cent to  $56.8bn (£31.1bn, €38.7bn).  When the government updates its estimate of economic  growth for the second quarter today, the figure is expected  to be much higher than the 1.9 per cent annualised rate  reported at the end of July before the most recent trade data.  Consensus yesterday morning among economists was of a  0.8 percentage point gain leading to annualised GDP growth  of 2.7 per cent, with some even expecting it to reach as high  as 3 per cent.  Nowhere is the change more apparent than in the Port  of Long Beach in southern California, just south of Los  Angeles - the largest in the US and an important shipping  gateway to Asia.  Between January and July, loaded inbound containers  were down 12.7 per cent compared with the same period last  year, amid declines in import volumes for a whole variety of  goods...

 David Rosenberg, an economist at Merrill Lynch, said  just before the June trade data was released that declining  imports alone contributed 1.3 percentage points to US  growth in the second quarter, compared with 1.2 percentage  points for rising exports - the first time in five years that  falling imports played a bigger role than exports in propping  up GDP.

In other words, that "strength" is something of a trick of the import/export net, with weakness in imports (not a signal of great confidence in consumers) now more important than export strength for our "growth."

sj

4 Comments – Post Your Own

#1) On August 29, 2008 at 3:31 PM, TMFDeej (99.30) wrote:

HA.  Hey Seth, now this is funny.  I posted on the exact same subject about five minutes after you posted this.  Great minds think alike :).  Have a great holiday weekend.

Q2 GDP was a bunch of baloney / PM Smokes Big MO 

Deej

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#2) On August 29, 2008 at 3:31 PM, TMFDeej (99.30) wrote:

HA.  Hey Seth, now this is funny.  I posted on the exact same subject about five minutes after you posted this.  Great minds think alike :).  Have a great holiday weekend.

Q2 GDP was a bunch of baloney / PM Smokes Big MO 

Deej

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#3) On August 29, 2008 at 4:48 PM, anchak (99.85) wrote:

Seth and Deej...Thanks....knew about it pretty much - all you need to do is to watch Bloomberg- someone will point to the obvious there.

This is looking to be one deep mess , indeed.

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#4) On August 29, 2008 at 8:17 PM, TMFBent (99.82) wrote:

Well, I needed the Financial Times to point out the obvious to me... Maybe I should pay more attention to that Bloomberg Wire.

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