Don't Be Fooled, Real 4Q12 GDP Was Even Worse Than 0.14%

Phoenix Capital Research's picture


A few weeks ago we commented that the Great Global Rig of 2012 was ending. Yesterday’s GDP print confirms this.


We noted in the second half of 2012 that the US Federal Government was engaging in a massive rig to make the economy look better than it really was in order to help the Obama re-election campaign. This showed up in the jobs data as well as the 3Q12 GDP print.


Now the election is over and we’re stuck with the hangover. The mainstream media likes to claim that the fourth quarter GDP number is the result of the Government cutting spending, but the truth is that Government outlays increased 12% in 4Q12. 


Indeed, the sad truth is that the US economy is actually in far worse shape than the official data indicates. As we’ve noted before, the Feds dramatically understate inflation to make GDP growth look better.


Case in point, the GDP deflator today is a mere 0.6% when real inflation is closer to 8%. So even the -0.14% print is in fact overstating real growth dramatically. If you account for the real increases in the cost of living in the US, GDP shrank well over 1% in 4Q12.


The impact of this will be huge. Remember that the Fed only just announced QE 3 and QE 4 in the second half of 2012. The fact that we’ve got this terrible GDP print in spite of this doesn’t do much for the Fed’s claim that QE will stimulate growth.


As we noted in yesterday’s article, the Fed is already splintering on the benefits of QE. For the US to print such an ugly GDP number right after QE 3 and QE 4 were announced doesn’t bode well for more aggressive policy from the Fed. But then again, we are talking about the Fed here, so they could very easily claim that the bad GDP print is because QE 3 and QE 4 are not big enough.


Regardless of this, it’s clear the market is peaking out. The Russell 2000 has begun to diverge from the Dow and S&P 500. Former leaders like Apple and RIMM are tanking, while companies that are losing business rapidly (Amazon) continue to rally.


This is precisely the sort of action we saw going into the Tech top and the 2007 top. The Fed has managed to create a bubble in stocks and housing again… right as the US economy collapses (just like in 2000 and 2007).  We all know what came next.


For more market commentary and investment insight as well as several FREE Special Reports outlining some of the biggest risks in the financial system today, visit us at


Best Regards


Phoenix Capital Research


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Shevva's picture

Actually I've seen a secret document from the FED, they plan to employee 100,000 people to go round with hammers breaking windows.

It's all they've got left.

That or pop to the toilet and jump out the window leaving you with the bill. (The first sign will be the rats leaving.)

Spigot's picture

Not sure its going to go to far as it did in 1938. But there sure will be a lot more hammer handlers being interned the days following, the way gun sales are moving, ya know?

WTFUD's picture

you can read as many books as you want and still be a prick. all that private expensive education has got us to where we are today; up shit creek without a paddle; having to kill before we can move forward is just super; also i doubt if we learn punctuation and grammir we are going to be saved. ( a come from alibami wit a bango up me jacksie ).

sbenard's picture

Not only that, but historically, at the beginning of a recession, the initial print of GDP typically starts POSITIVE, only to degrade with each monthly revision thereafter. Dr. John Hussman, in his weekly market commentaries, has documented this phenom. Historically, a print of +2-2.5% in the initial estimate, ends up being -1.5% in the end!

Thus, if the INITIAL GDP calc was already negative, the ultimate calculation of GDP will be far, far worse. It only gets worse from here!

But thanks to Bubbles Bernanke, stocks have already shrugged off the bad news and are going yet higher once again! Free money for all (of the 1%) -- at least until we hit the debt brick wall!

Of course, a recession means still higher deficits, lower income tax revenues, and MORE QE!

Calamity is certainty! Plan and prepare accordingly!

neutrinoman's picture

The negative Q42012 GDP print is solely an artifact of all the manipulation of the Q3 number designed to get Obama re-elected. The official Q3 number (due for quiet revision downward) was about +3% annualized, an absurdity mainly a result of moving around federal spending. The actual number was probably something like 1.3 or 1.5%. (Q1 and Q2 were 1.9 and 1.6%, resp.) So the Q4 number is probably in reality something like 0.5-1%. The result for the year is about 1.3%, slower than 2011 (which was slower than 2010).

Simply put, US growth has been slowing since the 2009-10 rebound. We've probably narrowly avoided a recession, with a continuing almost-stall in early 2013. The behavior of stock earnings, which suffered a mild stall and recession in 2012, also implies this.

But the statistician-fraudsters and their mouthpieces in the media have to get their respective stories straight, so as to not look TOO obvious in what they're doing in the window-dressing department.

enloe creek's picture

going to print and hang on wall lol

Notarocketscientist's picture

How many trillions printed now?  16 or so? 

And yet the US economys is sinking...

The FED is OUT OF AMMO.   The disconnect between the markets and reality will end soon.

Bernanke's game is up - he is officially PUSHING ON A STRING.

JimS's picture

I don't think they are totally out of ammo, didn't they just file an RFP for better "assualt weapons" and a ton of ammo for said PDW's? Oops, that was DHS, maybe some of those weapons will go to the FED. Just thinking "outside the box".

barliman's picture


This time IS different.

This time it will be much worse than 2000 or 2007.

Who would have thought we would so quickly come to the point of viewing Dubya's tenure with fondness.

Oh, I know many of you will shout, "We aren't and we NEVER will be!"

Give it time. You will.

Anusocracy's picture


Compared to Mao, Stalin was a fine young man, and compared to Stalin, Hitler was the one you hoped your daughter would marry.

Doesn't work that way.

Black Swan 9's picture

They're not mutually exclusive..

Notarocketscientist's picture

Who would have thought we would so quickly come to the point of viewing Dubya's tenure with fondness.


Please tell me you are kidding.  Because rule number one here is:



You may (partially) redeem yourself by claiming you are on disability insurance because you had no job so you rammed your head (repeatedly) into a brick wall to qualify.


barliman's picture

Try thinking outside the box ...

"Who would have thought we would so quickly come to the point of viewing Dubya's tenure with fondness."

Does not require any degree of partisanship for or respect towards Dubya.

The inference made was that as fucked up as Dubya's tenure was ... (and I have criticized his fuckery numerous times in the past 3.5 years)

... the SCOAMF et al are going to bring down a shit storm that will make Dubya's tenure look like the "good old days" by comparison.

My desire to "redeem myself" to a 23 week newb is in inverse proportion to your dimwitted ego.

R.I.F. - Reading Is Fundamental. Your life would be at least twice as worthwhile as whale shit if you would invest the time to improve your comprehension skills.

economics9698's picture

Shut up and quit making a ass out of yourself.