Saturday, August 30, 2014



Mainstream media headlines in the last two days offer an amusing look at GDP forecasts.

GDP Stronger Than Expected

Yesterday, the Financial Times reported US Rebound Stronger than First Thought.
The US economy’s second quarter bounce was stronger than previously thought, with the official annualised growth estimate increased from 4 per cent to 4.2 per cent.

The revision is more evidence of robust underlying growth in the world’s biggest economy as it swung back from a weather affected 2.1 per cent fall in the first quarter.
"Economic Pilot in Reverse"

Today, the Wall Street Journal reported U.S. Consumer Spending Declines 0.1% in July.
Consumer spending fell in July and income growth was weak, signs that cautious consumers could restrain economic growth in the second half of the year.

Personal spending, which measures what Americans pay for everything from sneakers to doctor visits, declined a seasonally adjusted 0.1% in July from a month earlier, the Commerce Department said Friday. It was the first time spending fell in a month since January.

Personal income, reflecting income from wages, investment, and government aid, rose 0.2% in July—the smallest monthly increase of the year.

"Looks like the pilot threw the economy's engines into reverse at the start of the third quarter," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ. Forecasts that the economy would grow at a strong 3% clip in the third quarter "look increasingly unrealistic if consumers don't return to the shops and malls."

Economists surveyed by The Wall Street Journal had predicted personal spending would increase 0.1% and incomes would rise 0.3% in July.

Barclays lowered its forecast for third-quarter growth by a half-percentage point to a 2.2% pace. Goldman Sachs economists lowered their estimate to a 3.1% annual rate from a 3.3% pace.
Diving Into the Numbers

Please consider Personal Income and Outlays: July 2014 by the BEA.
Personal income increased $28.6 billion, or 0.2 percent, and disposable personal income (DPI) increased $17.7 billion, or 0.1 percent, in July, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $13.6 billion, or 0.1 percent. In June, personal income increased $67.1 billion, or 0.5 percent, DPI increased $62.9 billion, or 0.5 percent, and PCE increased $50.5 billion, or 0.4 percent, based on revised estimates.
Real PCE Highlights

  • Real PCE -- PCE adjusted to remove price changes -- decreased 0.2 percent in July, in contrast to an increase of 0.2 percent in June.
  • Purchases of durable goods decreased 0.6 percent, in contrast to an increase of 0.5 percent. Purchases of motor vehicles and parts accounted for most of the July decrease.
  • Purchases of nondurable goods decreased 0.2 percent in July, in contrast to an increase of 0.3 percent in June.
  • Purchases of services decreased 0.1 percent, in contrast to an increase of 0.1 percent.
  • The price index for PCE increased 0.1 percent in July, compared with an increase of 0.2 percent in June.
  • The PCE price index, excluding food and energy, increased 0.1 percent in July, the same increase as in June.

Zero for 79

Bloomberg reports U.S. Consumer Spending Falls for First Time in Six Months.
Consumer spending in the U.S. unexpectedly dropped in July for the first time in six months, a sign households are lagging behind as wages fail to accelerate.

Household purchases decreased 0.1 percent after increasing 0.4 percent in June, Commerce Department figures showed today in Washington. None of the 79 economists in a Bloomberg survey projected a decrease.

Rounding out the differences between GDP analysis yesterday and today, ZeroHedge reports Here Come the Q3 GDP Downgrades.

Growth Engine

By the way, and in contrast to widespread economic thought, consumer spending is not the "engine of economic growth". Savings, investment, and production are.

1 comment:

  1. Here is something else for everyone to ponder: why democrats do so well with minorities?

    http://www.nytimes.com/2014/08/31/us/getting-ferguson-majority-to-show-its-clout-at-polls.html?_r=0#

    Democrats are getting the “mostly black” citizens of Ferguson to register to vote by tagging what happened there to racism of whites and the Republican Party. White people in general as well as Republicans had nothing to do with what happened in Ferguson, but the Democrats do an excellent job at stirring up the blacks by using these magical words: dat be raycist!

    Two parts of U.S. government is now controlled by the Democrat Party, and at one point after the election of Obama, the Democrats had everything. I would ask the extremely intelligent minority people out there how THEIR lives improved during that time. I bet their lives did not improve one bit!

    I would ask the minority people why is it that once a city becomes minority majority like Ferguson or Detroit it becomes a desolate wasteland. Why is it that no African country became industrialized seeing the people are sitting on trillions of dollars worth of wealth? I would ask blacks why their crime rates are echoed all over the world; not just in the US. Is it possible that the trouble lies with the blacks themselves…oh, but that would be “raycist” to mention that fact wouldn’t it?

    We are doomed with these people because they are going to have to open their OWN eyes. No matter what: they will vote democrat just like their masters want them to! There are some intelligent black people, but most have low intelligence and don’t realize they are only hurting themselves by voting democrat.

    This is a famous quote attributed to Ben Franklin:

    "When the people find they can vote themselves money that will herald the end of the republic."

    Black people have been voting themselves a raise for years; ergo, bankrupting cities, states and now the country. Not only blacks, but the Democrat Party! When blacks in particular vote, they vote as a solid block. This kills a pluralistic republic and eventually everything degenerates into a banana republic not unlike what we mostly see in Africa today. Here is what killed white America and its right to protect itself from migrating hoards of uncouth, lawless blacks…its own judicial system:


    In the Shelley v. Kraemer decision, the U.S. Supreme Court ruled that, although as private contracts racial deed restrictions were legal, state enforcement of such contracts violated the equal protection clause of the Fourteenth Amendment. (From Clarissa Rile Hayward and Todd Swanstorm’s book Justice and the American Metropolis.) Whites used to have a say in who they would let into their neighborhoods, but the courts nullified the rights of white Americans. The courts said the 14th Amendment rights of the blacks were being violated, then what about the rights of whites who want to protect not only their property values, but also want to protect the lives of their families from these heathen. As I said, show me ONE place that has a majority black population that is civilized and I will recant this article.

    I don’t speak for everyone, but I believe our courts have unjustly ruled against whites for TOO long! By the way, you can google this: the Shelley House is now a historic landmark, but looks like a piece of crap after black run America got finished with it!

    We don’t need more foreigners to take away our precious resources, and blacks need to grow a BACKBONE and take care of their OWN communities (hopefully not like they did to Detroit!)

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