Monday, July 21, 2008

Second Quarter Real GDP = +3%

So predicts First Trust Advisors.

"Eventually, those forecasting recession are going to run out of time. The clock is already ticking and the economy remains resilient."

8 Comments:

At 7/21/2008 6:15 PM, Anonymous Anonymous said...

Wow, it must be quite embarrassing to issue a report like that on a day when several large tech companies reported horrific earnings and are all down big. MRK, APX, AAPL, SNDK.

Yes Q2 is going to get a nominal boost because of the "stimulus" checks, but that's phoney growth. You're going to see consumer fall off a cliff in Q3. Mark my works Mark.

You're a great free market economist, but you're making a mistake riding on the pollyanna bandwagon. This is a credit bust the likes of which we haven't seen since the Depression.

 
At 7/21/2008 6:20 PM, Blogger the buggy professor said...

Thank you, Mark, for this and the above post, both of which help to fight the excessive pessimism afoot about the US economy.

........

What remains extraordinary is how resilient and efficient our economy has shown itself to be amid all the financial shocks, starting with the ballooned stock market of the late 1990s. And then the auditing scandals that unfolded in 2001, plus (lest we forget) the war on terror and the war with Saddamite Iraq over the next two years and the very costly occupation ever since.

And now, more recently, the mortgage fiasco, which has hurt housing (especially new construction, much less home sales), and entailed a credit crunch . . . along with the need for rescue missions carried out by the Federal Reserve the last year of banks and brokerage houses, not to forget some new commitments undertaken in the last several days.

Add to these recent financial shocks the only real economic cause of slower growth for the two quarters ending at the start of April this year: rising energy and food prices, with their dislocations to habitual household expenditures and budget-constraints.

......

And yet the real economy keeps chugging along, buoyed by consumer spending --- this, despite consumer confidence at a 30 year ebb in the latest household survey --- and some business investment (new construction) and above all the continued rise in American exports sales around the world.

The worries here?

Will core inflation remain under control in the next, say, 18 months? Will GDP growth in Europe, Asia, and other regions be strong enough in the same period to absorb ever larger imports of US products? What will happen to the price of a barrel of oil, what with the volatility the price has shown the last several weeks . . . not to mention the startling 30% rise to its peak price earlier this month in just three or four months?

.......

Let's all keep our fingers crossed as we wait for the outcomes on these scores. And let's hope that the numerous dislocations and shocks caused by instability in financial institutions since the late 1980s is tamed by certain governmental or Federal Reserve actions, without choking off the desirable innovations in the financial sector that have gone along with the instability.

Thanks again for all this informative posting.
......

Michael Gordon, aka the buggy professor: http://www.thebuggyprofessor.org

 
At 7/21/2008 6:39 PM, Blogger Sophist said...

You got to start wondering: what GDP stands for in an environment of a debased currency, as Jim Rogers called the USD.

Stock market sector rotation indicates that US economy will enter a recession at the end of third quarter. Already, companies like Microsoft and Intel predicted lower earnings for third quarter.


"Let's all keep our fingers crossed as we wait for the outcomes on these scores."

I don't know if Bernanke is doing just that but IMO he should raise rates immediately by at least 200 bp to buy insurance against inflation. Then, arrange for another Plaze Accord to raise the value of the dollar.

Low dollar and low rates is a short term benefit. The longer term effects will be a disaster.

 
At 7/21/2008 10:22 PM, Blogger bobble said...

think of the economy as a slow motion train wreck.

for example. just today, those 'whiners' running American Express reported:

“Over the past month or so, we have seen clear signs that the US economy is weakening. . . .Card member spending particularly among consumers slowed sharply during the latter part of the quarter. Credit indicators as we signaled a few weeks ago deteriorated beyond our expectations, and by almost any measure the US economy and business environment are much weaker than the assumptions we first spoke to you about back in January and the conditions that existed in early June. Now this fallout was evident across all consumer segments, even our longer-term super prime card members.”

" . . .we saw our credit deteriorate in June beyond our expectations as the write-off rates rose and roll rates within the portfolio deteriorated versus prior months. In other words, more and more consumers who are falling behind in their payments are remaining delinquent. This causes us to assume that a greater percentage of past-due loans will not be repaid. In light of the magnitude of the negative economic trends and our experience, we now believe the economic weakness in the US will likely worsen throughout the remainder of the year"

 
At 7/22/2008 8:17 AM, Blogger Walt G. said...

Does the GDP count take into consideration funded and unfunded liabilities? I understand the net worth concept a whole lot better than GDP.

The cost per U.S. household of unfunded promises made by federal, state and local government:

Medicare $255,280


Social Security $144,251


Federal debt $43,380


Military benefits $25,863


State and local debt $17,537


Federal civil- servant benefits $14,374


State and local retiree benefits $13,114


Other federal obligations $2,548


Total $516,348


Source: USA TODAY research; numbers rounded

 
At 7/22/2008 1:25 PM, Blogger OBloodyHell said...

> This is a credit bust the likes of which we haven't seen since the Depression.

Thanks for expressing your opinion. Nice of you to bolster it with any specifically pertinent facts or statistics.

Oh.

Wait.

Never mind...

Hint: all of *four* tech company earnings don't qualify.

> Eventually, those forecasting recession are going to run out of time. The clock is already ticking and the economy remains resilient

All they want to do is hold out until November, confident that BDS+BEB* = Obama for PotUS.

==================
*BEB -- Bad Economy Bullshit




> The cost per U.S. household of unfunded promises made by federal, state and local government:

Walt, when the FSL gummints renege on those promises, exactly what will those vast numbers not sitting in chairs do? Vote the bastards out? The bastards who created this situation with unfunded mandates will be long gone, so what concern is it of theirs? They have no real form of recourse. Those mandates are worth less than the paper they are printed on, and anyone who depends on them is a fool. Live your life and plan for your future as though they did not exist, excepting to be certain to keep a good chunk of your networth outside of their reach, because before they give up and ack that they can't fix the problems created by their forebears all the way back to FDR, the gummints in question are sure to get confiscatory.

bobbie: How much of that weakness is caused by the MSMs' endlessly chanting their inaccurate mantra "ReCESSion!!! ReCESSion!!! ReCESSion!!!"?

I think it's going to be hilarious, in a darkly ironic sense, if Obama gets to be PotUS and tries to implement their BS idiotic policies, and tanks the economy to make it worse than Carter did, while equally turning our Foreign Policy into a similarly bad shambles. The Dems won't be able to get a dogcatcher elected for another 30 years after that.

 
At 7/22/2008 6:11 PM, Blogger bobble said...

OBH:"How much of that weakness is caused by the MSMs' endlessly chanting their inaccurate mantra "ReCESSion!!! ReCESSion!!! ReCESSion!!!"?"

uh, MSM is causing people to not pay their credit card bills?

" . . . more and more consumers who are falling behind in their payments are remaining delinquent. "

 
At 7/22/2008 11:30 PM, Anonymous sam said...

i've read brian westbery/1st trust-super optimist and dr.nouriel roubini-super pessimist- for the past two years, and over the longer term so far rubini has been way more accurate by my account.

 

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