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Final GDP Revision Disappointment, Comes At 2.7% Versus 3.0% Last Revision, 50%+ Annualized Drop From Q4's 5.6%
The final Q1 GDP revision came in at 2.7%, a huge drop from prior, and especially the first GDP forecast which was 50 bps higher. Trillions in stimulus and the economy barely grew. Time to revise Q3 and Q4 GDP forecasts to just over 1%, and to whack those S&P EOY forecasts. Digging through the data, consumer spending fell to 3% from 3.5% earlier, business investment was revised down to 2.2% from 3.1% previously. The only imprvoement, the PCE price index rose to 1.6% from 1.5% prior. All in all, a complete disaster.
From the press release:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.7 percent in the first quarter of 2010, (that is, from the fourth quarter to the first quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2009, real GDP increased 5.6 percent.
The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, and nonresidential fixed investment that were partly offset by negative contributions from state and local government spending and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP in the first quarter primarily reflected decelerations in private inventory investment and in exports, a downturn in residential fixed investment, a deceleration in nonresidential fixed investment, and a larger decrease in state and local government spending that were partly offset by an acceleration in PCE.
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I smell rally.
To close that ES gap down around 1086.
The market priced in only a 1.6% gain so yes we'll get a rally.
Markets rally on revision being less than expected.
You Sir are a party pooper!
The 'recovery summer' tour has begun!
The economy more or less sucks, as a whole. Double dip on the way. Likely catalyst either another financial market meltdown, or, cutting off unemployment benefits to the couch potato millions.
I think this BDI graph will explain in a very simple black diamond ski run visual.
http://www.bloomberg.com/apps/quote?ticker=bdiy&exch=IND&x=15&y=11
Actually the BDI seems to be finding a support, time to buy Dry bulk shippers again. I'm going to go for EXM and DRYS today.
Good Greeks!! EXM?
Inventory component gradually coming back out of the figures, leaving.... zero!
Umm, actually I take that back. Seems like inventories revised up.
Retail sales down, imports up. So when inventory rebuild does fall away from the numbers, this sucker is going to zero.
why, oh why did I just check /ES?
Don't forget next quarter will be off the charts. iPhone 4 sales were zomigod huge. Steve Jobs was quoted as saying "r0x3rz mi b0x3rz" So the market will rally because GDP came out missing estimates. Go go robo market pump!
Futures already seem to like it. Jobs gave a great fix to new Iphone readers regarding antenna issues. He said, "Just hold it differently".
Great world we live in where people line up to buy things then are perfectly fine standing on their heads holding the phone with their feet because the cult leader tells them that's what they should do. And they love it!
Can't wait for Consumer Sentiment!
Anything to get a date...
"Just hold it differently".
That would be my advice to Jobs...Since he is a jack off...
Leo? LEO???
This should accelerate talk of QE 2.0. Unlike TD, I feel we'll see it much sooner than Jan 2011. It would provide a nice lift off for the markets heading into the midterms. With enough juice we could push 13k by election time. People would feel rich!!!
50% annualized drop? LOL
The funny (not) part is when you actually look into what GDP consists of...
So, how much of this 2.7% GDP "growth" is the sugar-high from the Fed.Gov deficit spending?
Barry: I need more cowbell, I mean SUGAR!!
Here's the math, and I'm assuming the most conservative (i.e. best-case, rose-tinted) scenario:
1. The EUR depreciation and generalized Euro-austerity is going to clobber US exports -- US exports to the EU (goods plus services) were about $400 billion in 2009. According to the BEA report, US exports were up 10% in the first quarter of 2010. Impact: -$30 billion.
2. The fiscal impact of the Federal StimPak funds peaked this spring, and deficit hysteria means no fresh stimulus. Impact: -$200 billion.
3. The second leg of the housing decline is beginning. More pain for local government, more pain for consumers, more pain for the banking system. Impact: -$100 billion.
4. US states and local governments were $110 billion in the red for fiscal 2010 (starting this summer), and this assumed more Federal bailout funds. This could easily balloon to $140 or $150 billion. Impact: at least -$110 billion.
Total: -$440 billion in effective demand, a demand shock of 3.3% of GDP, more than enough to tip us back into a recession.
Most likely scenario: total political meltdown for the Dems in November, followed by IMF-style "structural adjustment" (i.e. bailout of irresponsible greedhead oligarchs, destruction of what's left of the US middle class).
" total political meltdown for the Dems in November"
Unless...
Obummer: "Hey Rahm.... How much of a bump in the polls will we get if we go ahead and bomb Iran?"
Rahm-Baby: "How the f@ck should I know. Ask your pal General Pederast..."
Fat Larry Summers: "You mean General Betray-us?"
<Laughs> all around the Oval Office...
Don'cha know, the economy is just pacing itself for the new normal over the long haul. Everything is fine. Go back to watching Idol, like a good little worm.