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A Skeptical Rosenberg On The GDP Number: The Inventory-Imports Dichotomy And The Productivity Paradox
Rosenberg spots an oddity in today's GDP report: where did the boost in inventory come from? It sure wasn't from imports.
It was a tad strange to have had inventories contribute half to the GDP tally, and at the same time see import growth cut in half last quarter. Normally, inventory adds are at least partly fuelled by purchases of foreign-made inputs. Not this time. Strip out inventories and the foreign trade sector, we see that domestic demand growth in the fourth quarter actually slowed to a paltry 1.7% annual rate from 2.3% in the third quarter. Some recovery. Based on some simulations we ran, demand growth with all the massive doses of fiscal and monetary stimulus should already be running in excess of a 10% annual rate. So, the real question that nobody seems to ask is why it is that underlying demand conditions are still so benign more than two years after the greatest stimulus of all time. The answer is that this epic credit collapse is a pervasive drain on spending and very likely has another five years to play out.
And where did the miraculous productivity boost come from?
If you believe the GDP data — remember, there are more revisions to come — then you de facto must be of the view that productivity growth is soaring at over a 6% annual rate. No doubt productivity is rising — just look at the never-ending slate of layoff announcements. But we came off a cycle with no technological advance and no capital deepening, so it is hard to believe that productivity at this time is growing at a pace that is four times the historical norm. Sorry, but we're not buyers of that view. In the fourth quarter, aggregate private hours worked contracted at a 0.5% annual rate and what we can tell you is that such a decline in labour input has never before, scanning over 50 years of data, coincided with a GDP headline this good. Normally, GDP growth is 1.7% when hours worked is this weak, and that is exactly the trend that was depicted this week in the release of the Chicago Fed’s National Activity Index, which was widely ignored. On the flip side, when we have in the past seen GDP growth come in at or near a 5.7% annual rate, what is typical is that hours worked grows at a 3.7% rate. No matter how you slice it, the GDP number today represented not just a rare but an unprecedented event, and as such, we are willing to treat the report with an entire saltshaker — a few grains won’t do.
Eloquent as always.
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Hell yea epic recovery in place! S&P to the moon!
I think more people are pondering this than Rosenberg assumes. Actually, maybe not. There is no need to ponder it because we all know the answer already.
That ludicrous number is not even worthy of comment.
Desperate men do desperate things. Judging by the failed rally this morning, not even the establishment believes it.
Expect the desperate measures to become even more insane as the writing on the wall starts to glow in neon flashing lights.
"Desperate men do desperate things. Judging by the failed rally this morning, not even the establishment believes it."
+1
Sure is what this is looking like. Its like Maxwell Smart asking "would you believe (insert total bullshit here) ?"
+1
LOL!!
"benign" ??- Deadly would be a better choice of word.
Unprecedented.
Surprising.
Unexpected.
We seem to be seeing/hearing these words a whooooooooooole lot lately, eh?
Silly Rosenberg, tricks are for kids.
So long as Rosenberg insists on apply logic and reason when perusing any government documents and statistics, not only will he be frustrated in his ability to make any sense of what he's reading but he will appear a conspiracy theorists or even worse, down right crazy for not drinking the Kool-Aid.
Get with the program dude. The rest of the world is entirely engulfed by the rabbit hole and suitability numb to an real world economics. Bottoms up poor fellow. After 30 minutes or more, the vision will begin to cloud and the mind will dull.
You take the blue pill - the story ends, you wake up in your bed and believe whatever you want to believe. Welcome to the Matrix my friend.
+1
These days the application of logic and reason can be dangerous in any field of endeavor, not just economics (see Climate Change, Middle Management.)
What amazes me about the times we live in is just how many people can not accept any form of objectivism. You must absolutely tell them what they want to hear or they will punish you. It is important to identify these people and always communicate with them in a manner that fits their world view.
Know any leaders who fit this description?
Charles Pierce, contemplating the advent of forced schooling in the 1870s:
Let the will of the state act, then, instead of that of the individual. Let an institution be created which shall have for its object to keep correct doctrines before the attention of the people, to reiterate them perpetually, and to teach them to the young; having at the same time power to prevent contrary doctrines from being taught, advocated, or expressed. Let all possible causes of a change of mind be removed from men's apprehensions. Let them be kept ignorant, lest they should learn of some reason to think otherwise than they do. Let their passions be enlisted, so that they may regard private and unusual opinions with hatred and horror. Then, let all men who reject the established belief be terrified into silence. Let the people turn out and tar-and-feather such men, or let inquisitions be made into the manner of thinking of suspected persons, and, when they are found guilty of forbidden beliefs, let them be subjected to some signal punishment. When complete agreement could not otherwise be reached, a general massacre of all who have not thought in a certain way has proved a very effective means of settling opinion in a country. If the power to do this be wanting, let a list of opinions be drawn up, to which no man of the least independence of thought can assent, and let the faithful be required to accept all these propositions, in order to segregate them as radically as possible from the influence of the rest of the world.
Source: http://www.fordham.edu/halsall/mod/peirce.html
Pierce Bio: http://plato.stanford.edu/entries/peirce/
Target audience needs to be middle class -- 12th grade/some college education level with or without a job. Until it explained to the man on the street in terms which he can understand ... Obama, Washington and Wall Street will rule the roost. It's going to take the weight of the American people to dislodge the fingers on the scales skimming and living it up on transaction costs.
Skimming the transaction costs is what seems to keep The Street alive. 401K's and other custodial accounts must be churning.
Republicans, Obama, Washington and Wall Street
Hate to point it out, but the average American currently reads at a sixth grade level, and is too busy living paycheck-to-paycheck to notice Rome burning around them.
It won't be until the social institutions that they're accustomed to start to break down that they'll realize the jig is up.
The agenda comes first then the reasoning and logic to support it.
I totally disagree. They need a swift kick in the ass and it's your job as a grownup to tell these adult children that they're not in Kansas anymore.
This is the matrix if I ever seen one that is for sure.
CD, "trix" are for kids. "tricks" are entirely different... ;)
Oso, I know you and I would consider ourselves "old farts" but I was trying for a pun, as in combining the "Trix" breakfast cereal of my youth (silly rabbit, Trix are for kids) and "tricks of the trade".
For the younger generation who would like to view this reference, click away.
http://www.youtube.com/watch?v=qNUJsJMWB5I
+1 for the reference
"Last year the economy was down 6%, this year it's up 6%... that's a reversal of 12%"
I guess Harvard education doesn't include common sense math..... that's not a reversal *sigh*
100% - 6% = 94
94 * 1.06 = 99.64
Ummm, we're not even flat.
*sigh*
I guess since I'm unwilling to take minority benefits and paid my way through school thanks to the GI Bill I don't get a rich white man to pay me to sell out.
According to GDP theory, spending borrowed money constitutes income growth. Isn't that what all the defaulting homeowners and credit card junkies thought?
According to GDP theory, if I fix your broken toilet, that constitues productivity (services).
Spending is production, borrowing is income. All I can say is good luck on that.
"According to GDP theory, if I fix your broken toilet, that constitutes productivity (services)."
If I take a dump in your toilet, is that not also considered productivity? Or is it just considered elimination?
Sorry but it's Friday and I couldn't resist. Men and bathroom/toilet jokes go hand in hand. :>))
It's still productivity since the sewage is eventually treated and someone's salary makes it into the GDP "stream" so to speak.
Does a bear shit in the woods? What then? :>))
In this case we have to factor in seasonally adjusted influence, usually bears sleep at this time of the year. Full impact we will experience in the summer. Don't ask any more questions about all other species! Ok?
{Head sheepishly turned down, intently examining shoes for specks of dirt.}
OK, no more animal (of any species) bowel movement in woods questions. :>)
In this case we have to factor in seasonally adjusted influence, usually bears sleep at this time of the year. Full impact we will experience in the summer. Don't ask any more questions about all other species! Ok?
In this case we have to factor in seasonally adjusted influence, usually bears sleep at this time of the year. Full impact we will experience in the summer. Don't ask any more questions about all other species! Ok?
Government stimulus is not growth, that's like saying there's population growth every time I bust a nut into the toilet bowl. http://www.zerohedge.com/article/get-ready-more-upward-gowth-revisions#comment-207303
Very vivid! Can I use that?
"If I take a dump in your toilet, is that not also considered productivity? Or is it just considered elimination?"
Ha +1000
As the Fed stocked ranks of academia would have you believe as gospel - Why yes!
Was that necessary? I agree with and was actually thinking the same thing when Obama said that just now, but nobody here gives a shit about what race you are. That comment was quite ignorant, and I know you're better than that.
hrmmm, you're right. My bad and I apologize. Just very irritated with him, for some reason I still want to believe there's a chance he didn't sell out completely.
It's something in the air, probably the vapors from the Potomac river. If we could just get the Capitol moved to Abilene, we'd have all these problems fixed in a couple of years.
no man the question is when hasn't he sold out? He stunk to high hell from the very start, It's like his goal from the beginning was to be in politics, community organizer?!?! Never heard of it until him, my take is he did it to get close with the people, who then elected him, his goal was power from the start and who ever could or would enable that was fine by him, and it wasn't the people in his community, sure they voted for him but he needed money and sombodies approving nod to get on the ballot
What was there to sell out? He was on the take from the beginning -- the dems give us the slick, smooth intelligent shysters, while the 'cons give us those insider trading frat freaks.
Obama's econ advisor: Robert Rubin. McCain's econ advisor: Phil Gramm. Everything is gamed.
One of Obama's first appointments: Diana Farrell. Farrell has made all her millions working to offshore as many American jobs as possible.
It's like that 2000 election: Lieberman (who supported everything Cheney did as the unofficial pres) and Gore vs. Cheney and Bush.
Samo...samo....
How many of the suits get this? Certainly not in TV land or j/analists or inside the ring.
+100
The rate of growth change swung 12%. That is if x(t) is the GDP over time, then 12% is x''(t). The absolute change was x'(t) = 5.64%.
Can brotha get a link to the full Rosenberg?
Tyler always used to put the full paper on for download until recently.....
Maybe ZH has been leaned on a bit for copy rights???
https://ems.gluskinsheff.net/index.ncl.html
It's free to your inbox
yes go here and sign up for free
www.gluskinsheff.com
26 miles of tankers full of oil in inventories?
Banana Republic.
As every government (and agency) knows - unbridled (by the facts) optimism is what will make every thing better. Today's number is all that counts - the revision next month gets buried.
I think I got it. They are going to 'lie' their way out of it.
Ignoring all the facts, logic and truth can actually make them win, and that is a scary thought. They could care less what Rosie or Middleton have to say, they're just going to lie and that's that.
BINGO! (I wish I could make the fonts larger)
dang - you're right
< span style="font-size:XX-large" >GDP< /span >
It's all in how you style it. Nevertheless it doesn't work.
That's about what I tried. Did you HTML-encode that yourself? I disabled rich-text but I think Drupal has some XSS protection that's discarding the HTML
"They could care less what Rosie or Middleton have to say, they're just going to lie and that's that."
No insult intended but of course they will lie. We left the real world back when Nixon and company took us off the Gold standard and arguably earlier.
In a world no longer tied to reality as we think we understand the word, "reality" is anything the majority (which is almost completely influenced by the political and financial minority) says it is. As long as the majority, for whatever reason, wish to believe the lies, they will act in concert with the "truth" (lie) as they perceive it, thus making the lie real, fully formed and active.
Just look at the fact that unemployment is still rising (ignore the government figures thou understand that the government lies are an important part of forming public perception) and things are not really improving. But the government has been saying things are getting better for so long now that people are actually beginning to believe it and thus act as if it is so. Perception is reality.
This isn't just a philosophical point. If enough people believe something, they will act as if what they believe it's true, often times making their beliefs real by their actions. If you read far enough into the mumbo jumbo of modern economic theory textbooks, you will see that this is primarily what they are saying.
Once the economy was released from real world tethers such as theGold standard, reality is what the world makes "real" by it's actions. There are also parallels in modern quantum theory.
This is quite correct.
I was trying to visualize how "reality" reasserts itself. It goes like this:
1) Everyone thinks everything is fine and returns to spending/borrowing.
2) Unemployment continues to increase but they lie about it. Everything remains fine.
3) Credit is slowly choked off as defaults increase. Those who have credit keeping moving forward. Everything remains fine.
4) Government support to the unemployed increases to the moon. It's printed money, infinite supply. Everything remains fine.
5) Tax receipts plummet. More money printed to support government services and operations, and to bail out states and large corporations, infinite supply so no worries. Everything remains fine.
6) Foreign countries stop imports into the US because payment in dollars is refused. EMs trade among themselves in regional currencies. US inventory of goods and materials declines, but they lie about it. Everything remains fine but the end approaches.
7) Critical inventories of goods, replacement parts, and imported foods and textiles hit bottom. Those who had blindly gone forward finally give up; nothing to buy, nothing to do, nowhere to hide. Economy does not implode, rather it evaporates leaving no trace (this distinction is important.)
8) All federal, state and local services cease on lack of basic materials. Any ability that might have existed to reverse the slide is lost forever. General lawlessness as security apparatus evaporates leaving no trace. Criminal gangs replace local government providing defense, order and regulated access to critical resources. MSM cease to exist.
9) All levels of traditional government cease to exist, leaving no trace.
10) Game over. Reset. Would you like to play again?
cougar
Exactly.
Real "reality" will only assert itself when finite resources come face to face with infinite Federal Reserve Notes and the ink stained fingers of uncle Ben and family. It's a crowd control device, mass produced hydrocodone for the masses, used in conjunction with American Idol, LOST and the soon to be revealed son of stimulus 2.0, the purpose of which is to keep "We The People" off the streets and at our jobs, or what remains of our jobs.
What the vast majority of people (including a few here on ZH) fail to understand is that the extend and pretend game is being pursued only so that the powers that be and it's various hanger-ons and support staff have time to finish the looting and get gone.
People ask why "they" aren't fixing the problem. At what point do you stop patching the boat and either sell it for scrap or abandon it? But, if you can convince some sucker to pay good money for a bad boat and you're a psychopath with no regard for others, do you think you might try to reel in that sucker?
The key is not trying to answer your questions. The key is to ask the questions that will give you the answers you need to deal with the psychopaths who we allow to run the world. The problem is us, not them. They know exactly what they're doing. We don't wish to come to terms with our own culpability and denial with regard to our willing acquiescence to the psychopaths.
As long as we desperately try to avoid looking in the mirror, there will always be willing psychopaths ready and able to rip us off. As long as the majority delude ourselves into believing that all it will take is "THE ONE" to save us from ourselves, the psychopaths will happily parade one "THE ONE" after another "THE ONE" in front of us so that we can all follow "THE ONE" into the abyss.
What other than a psychopath (Paulson) would write a book and go on a press junket to support it? Gypsies?
You comment needs no comment.
BRAVO!!!!!!!!!!!!!!!!!!!!
My guess is that PCE is being overstated as well. With declining credit for the quarter, apart from a little pop in December, combined with declining employment, how the hell can retail sales be positive? Throw in falling refined oil deliveries, falling state sales tax (apart from a small rise in NY State - thanks Euros!) there is no way the PCE can be anything above zero. Personally, I've never put any stock in the GDP report - I usually describe it as a political number.
you have to understand where credit is declining
and where unemployment is heaviest....it is not
in the upper 2 deciles - most of these folks
are doing well....and they account for over half
of spending....
don't be fooled by the gross numbers....
on the other hand, their number will soon be up...
These inventories are being built to meet huge pent-up demand.
Yeah, that's it.
We can always revise this stuff later.
Gotta fake it before you make it!
Excellent point - I think you have beautifully and succinctly identified the approach of the current administration to the entire economy: fake it 'till ya make it.
This explains the GDP numbers, it explains Cash for Clunkers, explains the homebuyer tax credit, explains CPI, QE, TARP, ARRA, AIG and mark-to-market accounting.
Actually 'Fake It 'till Ya Make It' could be the title of a book describing the state of our political, economic and popular culture in the year 2010.
Given the failed rally this morning (seriously, the printing press got reappointed and the GDP numbers were "great" and we're up 0.06% as I type? HA!) and the tone of the State of the Union, Commander O and his team are getting more and more desperate, and it's becomming harder and harder to keep the Wizard's curtain closed from Toto, the mangling dog.
I give it about 2-3 weeks before we get some massive stimulus, probably something silly like 1,000 to everyone except the people who know how to use it (got to beat Bush's 600, right?)
I love the White House advisor on TV the other day who slipped up and almost called the job bill stimulus 2.0. He then say, "Well we have been told not to call it stimulus but tax breaks"
Are we spending money? Then its stimulus.
Also how many people want to spend $35,000 on an employee they do not need in order to save $5,000 next year?
No thanks
do not give them ideas, next thing you know they will anounce $35K per job credit. It is good for economy, worknig people and America. It will create or save 1 million jobs. Ah, forgot, last year the promise was to create or save 4 million jobs, did not work out that well...
I will be happy to hire employees for my business for a mere 25 K per. Just pretend I am the UAW.
They've got another 1.9T ... they've got to spend it somewhere
until we see tax withholdings and tax receipts increase we can't assume that this number is significant....if any of the increase reflected improved corporate earnings it is important to realize that some significant % - 20-80% - reflects overseas earnings and in no way reflects upon usa economic conditions....same problem with improved productivity: it will not lead to hiring because markets are not growing - at least not in the usa....
if this number holds and follow on reports persist upward then we may have a recovery of sorts but it will be an earnings recovery - not a jobs recovery and not a revenue recovery...
as far as i know capital expenditures are still in decline....at some point the capital has to be replaced or else companies have committed to economic decay....the cash cow gives off only so much cash before it starves.....the usa is not a capital friendly environment which is why it has fled to china....
the usa is not a capital friendly environment which is why it has fled to china....
And China is NOT a life friendly environment. Poor wages and envirnomental devastation.
Capitalism, the greatest form of mass suicide ever! Grow or die!
of course china is not life friendly but then
again neither is the usa with its legal euthanasia
and pro-suicide laws....and who can look away
from the millions of abortions performed since
1973 and claim that life is highly valued?
without a recovery in employment poor wages and
environmental disasters will become normal here....
actually it is a process which has been at work
for a long time.....
the plutocrats are transnational and for the time
being china is the place to be because they can
avoid fair wages and responsibility for a clean
environment....the plutocrats don't give a rat's
ass about any country or how they use it to obtain
their dainties...
they started the lies long before as they understated inflation they automatically blew up growth, ?ts a simple trick - America has not have growth for more than a decade. The only people who had growth were CEO's and wallstreet bonus pools as they created fake profits and robbed the bank from the inside.
There's really been no growth since the US peaked in oil production in the early 70s. Going from a net exporter (income- just look what it does for today's exporters!) to a (huge) net importer, how long can one keep this negative trend going? Well, I think that the answer is upon us...
It's a good thing Rosie's a Canadien, eh? Obama can't very well bomb Toronto. There would be repercussions, eh?
Good point . Obama can always send him off to Gitmo.
The Republicans can always send him off to Gitmo.
I heard they have WMDs oh yea and oil too.
you missed "eh" in your second sentence
I don't think that the lies are working anymore in the larger public body.
However, there will always be a delusional fringe who will believe everything the government tells them.
Unfortunately, I believe that only a system collapse will be the change agent. It's probability is in direct proportion with media spin.
What's the common-person to do? Deleverage, stop all unnecessary spending, increase cash reserves, and sustain this behavior for the next 5 years. Get informed, vote for worthy candidates, and vote with your dollars.
There, that takes care of 20% of the US population. Don't know what to do for the rest.
Your vote either way won't matter; all the candidates will belong to the banks and BigOil from the start. Once in office they'll do whatever their masters want. period. Go ahead and un-elect them next round, the next guy will be just like the last one. Even from the same fraternity.
Thank you Supreme Court!
cougar
Your excellent reply says it all cougar_w.
It is sad that the poster you replied to still thinks like a consumer, not a citizen, which is what those "think tanks," foundations and corporate mcmedia wishes him/her to think/believe/fantasize.
Dwell on that nonexistent vote while ignoring their established anti-worker, anti-citizen voting record.
Yup, the consumers are in the majority still, unfortunately.
Last Q revision was from what 3.7% to 2.2%?? Anyone think this will be different?
All this energy wasted looking at government statistics. Hasn't there been enough time spent on finding all the hidden clues provided in economic reports these days? Numbers are "BS" and have been for decades. It is not the numbers but the market reaction to them. As the markets move up regardless of the reported numbers (good or bad) the story stays the same. When this trend breaks (for whatever reason) the drop will be astounding.
Gas $2.30- $2.80 Q4 had to help the poor gorge themselves in GDP bliss
Ray DeVoe Jr. used to do a letter when he was at Legg, Mason and the best of them was titled ‘Most Dangerous Game’ – after the infamous General Zaroff who re-arranged the warning lights around his `Ship-Trap Island’ so he had more ship wrecked human game to hunt. Ray likened the re-arranging of Government statistics to be similar.
Personally, the company I manage is only spending what is absolutely necessary, and we are still getting hammered on our price.
Used equipment of the type we need doesn't exist and we don't have the access to funds (credit) to afford brand new equipment.
Our transportation side is now 5 years behind optimum replacement rates with more than half of our truck fleet now more than 10 years old. We perform regular maintenance because it's cheaper than a breakdown, but can't get enough together to start badly needed replacements
I have to trim 5% of our workforce next month and cut OT as much as possible, yet produce the same amount of product for sale at less than what we sold it for a year ago.
Yeah, great recovery, hope I still have a job next year
Welcome to the end game.
Your enterprise won't survive, you know. Run out the clock, watch your back, then get out. Take care of your people; soon we'll be taking care of each other on a massive scale.
Do not burn up your karma. Do the right thing, whatever it is and as soon as it reveals itself. There will be many bad things to offset. Maybe it will be enough. I don't know.
Good luck,
cougar
the reason you can't get credit is that it has
been sequestered to prop up wall street, the
federal reserve, and usg....
your anecodtal evidence corroborates my point
elsewhere about capital replacement...
the destruction of the little people is planned
and intentional.....if you survive it will be a
miracle....
the planned destruction is part of "national security"
Traders know the numbers are BS but if they all trade according to the propaganda then there is money to be made whether the numbers represent the truth or not.
I can't believe the XLF is holding up today. People are idiots.
someone keeps dicking with wfc and propping it.....i think wfc is going to end up on the gs con list soon.
going red in 3..2..1
Isn't the GDP just a politicized and LIED-UP numper? I mean 14 trillion dollars in 2008?? This surely must be the result of Fed running trillions through the the wall street black boxes, no? Where is the 'inventory' coming from? Is it even on american soil? I think GDP is just considered a matter of national security -- keep it going up and up or it all falls down
*gasp* So the government lied?
I think Rosie is suggesting that the US gov't is prevaricating.
I demand that we invade Canada now. Then we'll see about that GDP.
Please don't bomb branch plants!
Frikkin angry merikans!:)
40muleteam borax
A propos of nothing, when was the last time Rosey tried entering the US?
People have been kept out over smaller matters!
Rosenberg still thinks its March 2009 btw. When will ZH find another author to repost?
Hurry back - Lloyd is looking for you to lick his boots.
It's really beautiful how they took a market rally based on the phoney GDP number and did some heavy distribution into it. Textbook, right out of Jesse Livermore.
Yeah, well, distribution is about the only game anybody should be playing, right about now...
This GDP print was to be the finishing touch on The Week That Ended The Recession Rally. All of the stars were programmed to align this week - Geithner walked away clean (but only for now, people), blood-spattered Old Glory still waving, featuring a 15 minute assist and a departing hi-five from The Traitorous Hammer; POTUS was to slam dunk a "nothing but net" SOTU address to "get this party started, people", as The Janitorial Presidency marked the ends of its first year; Epson Ben was to get another go behind the wheel of the Bloated Fed, aided and abetted by that gruesome bridge troll Dodd; and finally the stack of tied newspapers printing a jaw-dropping GDP hit were to be dropped off on Wall Street in the cold, grey pre-dawn hours, heralding the End of the Recession and the Resumption Of Life As We Knew It.
Problem is the stench from the pile-up of lies has become too pervasive to ignore. The market decided to sell into the rally, as it become all too evident the GDP print masked a downward trajectory that will defy efforts to turn it back.
Next month's revised GDP report:
Opps! Did I say GDP was up 5.7%?? I meant unemployment is up 5.7%! Sorry...
Pretty much this is how I'm livin'....when someone says or writes something I start thinking "What's the motivation for this lie?"
Smell test here folks. 5.7% growth is AMAZING. It's bullshit, but AMAZING.
If true, then the SPX should have gained 60-80 points. Instead, it maintained it's present course which is in the general direction of the shitter.
Riddle me this. Why?
Hint: Cause' the investment community thinks its bullshit?
To make a proclamation on something contrived, is not truth. Behold GDP.
Mark Beck