Q3 2013 real GDP had a blow out revision and is now 3.6%. Originally GDP was reported to be 2.8% for the third quarter. As estimated, dramatically increasing inventory accumulation was the main cause of the large upward revision to GDP. Changes in inventories accounted for 46.5% of Q3 GDP. The increasing trade deficit shaved off 0.23 percentage points, as predicted. Actual economic demand is weaker in the third quarter in comparison to the 2nd. Additionally large inventory accumulation can imply a slowing economy.
Thursday, December 5, 2013
Robert Oak — GDP 3.6% Blowout Revision for Q3 2013 [Not as it seems]
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'Sequestration' cuts started in earnest after the Congress missed the may 24th deadline for a deal...
So we saw a significant drop off in govt top line spending in June July and mid way thru August...
Spring was much stronger due to strong govt top line xfers mostly from tax rebates...
So with spring as a guide, managements probably kept the lines running thru the summer and we can now see this just led to inventory build as the govt cuts to the top line spending during the same period reduced incomes so of course inventories are going to build from unsold product...
Now 4th qtr looks just about as bad due to the shutdown we have YoY govt top line for the quarter (so far) DOWN about $40B YoY, mostly due to the $50b or so they took out due to the shutdown in October...
It will be interesting to see the YoY comparisons to 4th qtr business revenues with this 40B (so far) hit to govt topline spending this quarter already baked in...
rsp,
GDP can still exhibit decent growth in the face of declining $NFA injection if the non-govt sector maintains production levels...
GDP does not pick up any increase/decrease in $NFA injection until the effect is manifested in the Consumption components... as GDP does not include govt xfer payments...
So this is like driving in the rear view mirror....
GDP and the Sectoral Balances Equation are not very helpful at all imo, and are OVER RATED by the academe of economics... they are not predictive at all.... history lessons...
rsp,
It doesn't help build confidence in reliability of their economic measurements when they gyrate inventory estimates around unrealistically. Production and investment don't scale up and down in this fashion. The analyst blames crude oil buildup as the culprit, but it is sort of a lame excuse. The maintenance on the Gulf Coast and California refineries/plants caused oil inventories to rise but finished product inventories to fall so it was nearly a wash. There is more oil production happening, but again, there is basically a fixed/slowly changing number of drill rigs that have been drilling wells for ...years. One or two wells don't usually produce a couple percent of GDP. Not realistic.
I think the accounting and measurement practices are more suspect than the reality. The data pattern of wild swings with rapid reversal to mean suggest the economists and accountants aren't doing a very good job measuring inventory, it looks like they are probably using data easily collected at a high level while ignoring inventory data that is harder to collect at lower levels in the economy.
The very serious people don't like to criticize government data because it makes them seem like they might be a little unhinged even when the data is clearly flawed.
What are you guys talking about ?
The news today is all about rising interest rates, unemployment going down, and return to a balanced better and upbeat economy.
Are you doom and gloomers ?
goog,
The labor force participation rate is in the toilet so the UE data is currently moron occupied territory... so 'buyer beware' there goog...
As far as GDP, we are getting these GDP numbers due to increases in $NFA injection levels due to small YoY govt increases in direct purchases and Transfer Payments as more people sign up for SS, Medicare/Medicaid, and the tax refunds via the EITC and UST interest.... None of these directly "add to GDP" until the recipients spend these balances and then it manifests in the GDP numbers ex post in the Consumption components months later when those accounting reports are tabulated... "Obamacare" will exacerbate this phenom wrt xfer payment data next year (If the Dems ever get it fixed! LOL!)
So we can see (albeit small) YoY increases in $NFA injections in near real time (which nobody in the academe of economics monitors/tracks) and then when this shows up in the consumption component of ex post GDP all of the economists are shocked and start to make moron statements like this guy does here that "it is not real" or "not as it seems" (LOL!) or some BS sounding like a Peter Schiff acolyte all of a sudden with "false prosperity" or these types of moron statements... pretty humiliating...
I looked at it at the beginning of this week and YoY for this 4th qtr here, we are actually DOWN over $40B YoY in $NFA injection for the 4th qtr so far mostly due to the govt shutdown in October, so I dont think GDP is going to be very strong in the YoY comparisons if producers cut back on production a bit this qtr due to the 3rd qtr inventory builds we can see in this report...
rsp,
Thank you Matt.
Can we see some posts which clarify the libor rate manipulation which was used by banks so they would win the casino derivative swaps so credit unions and municipalities would have to pay ?
If interest rates rose then the banks were supposed to pay to the credit unions and cities like Detroit.
If interest rates fell, then the credit unions and cities like Detroit were supposed to pay.
So the banks rigged the libor so that they would win.
Now Detroit has lost and pensions are taken away from police and firemen.
The banks also increased the margins on their customer's lines of credits because they knew they would be rigging the rates to go down so they could win on ALL FRONTS.
i.e. small business lines of credit and probably home equity lines of credit :
the lines of credit rates consist of wall street prime and a margin.
Since they rigged the main rate to go down, the margin had to be fudge factored so they increased this on their products.
Since the prime rate was rigged, then that means the Federal Reserve helped.
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