January 30, 2013

Wha??

According to the Bureau of Economic Analysis, the economy is, well was in the fourth quarter, contracting for the first time since 2009. It comes as quite a surprise to any non-doomsayer. The economy grew by 3.1% annualized in the third quarter, in the fourth it contracted by 0.1%. Granted, the "advance" report is revised multiple times; initially the advance report put third quarter GDP growth at 2% annualized. The fourth quarter number could be revised up, but will still be poor. 


The reported contraction was due in large part to reductions in government spending (mostly defense, which alone knocked 1.28% off growth), and in inventories. The reduction in inventories could indicate an expectation of worse growth going forward. Exports also took a hit, owing to a weak world economy.

On the other hand, the jobs data had the same middling growth during the fourth quarter, as in not indicating a worsening situation. Consumer spending and residential investment put in strong numbers as well.

It should become a bit clearer whether the good signs will be revised down or the bad signs revised up when the January jobs report and previous month revisions come out on Friday.

No comments: