And Wall Street Does Its Traditional "Nobody-Could-Have-Foreseen-This....Nobody" Dance
Here are some of the first sell-side and media perspectives on the abysmal Q2 GDP. And of course, nobody could have foreseen this huge collapse in the US economy. Nobody.
- "There is absolutely no good news in this report and one would really hope that it will focus the minds of those in Washington on resolving the debt ceiling issue as soon as possible."
- "Today's disappointing U.S. GDP data confirms what we have suspected for some time: the end of QE2 will be do to the U.S. economy what a lawnmower does to green shoots. With QE2 now ended and government spending in check given the ongoing debt negotiations, we reiterate our view that the U.S.'s light at the end of the tunnel lies in having a weaker dollar, at least until exports can recover and the U.S. fiscal position can be put back on track."
- "What is worrisome is that each month in the quarter was weaker than the month before. We are looking at another slow quarter in the third quarter but still positive so no recession....At this point growth is so close to zero and confidence is more important than it normally is and the distraction of the debt ceiling fight could make a big difference. A government shutdown would have a big impact as well."
- "I think that with GDP, we were we were looking for a little higher rates. I think it's a little disappointing, so the (oil) market is coming under pressure. I think some of the pressure in the market was already in there because of worries about the debt ceiling and some worries about a possible downgrade of Spanish debt.
- "The (oil) market has been trying to expand to the bottom area of the trading band for the last few days. Whether or not we're going to see any kind of a freefall I think remains to be seen but it looks like the market is under pressure.
- "The key point is going to be $95 a barrel, if we get down around those areas because that's where we've basically held for the last couple of weeks.
- "The smaller growth is not a positive sign and the oil markets are reflecting that with the 50 cent sell off we just saw."
- "Markets have been under pressure last few days as the U.S. debt talks stall, technically weak. More bad news for the markets, the GDP number missed estimates. Petroleum and equities extended their losses.
"Oil markets are watching Tropical Storm Don but it is not expected to be a major weather event, missing most petroleum infrastructure."
"The face value is certainly not great. The second quarter disappointed, but the first-quarter downward revision is more disturbing. It advances the pangs of concern. The debt ceiling nonsense is not going to help us. We're already in an economy that is subpar."
"Glancing through it doesn't look like anything is really out of line with what people were expecting for the second quarter... Gasoline price increasing from $3 to $4, that really slapped the consumer back considerably."
Solaris Asset Management
- "Everybody expected GDP to be weak for the second quarter, estimates had steadily come down, but this is a pretty shockingly low number. The revision to the first quarter is even more shocking."
- "Clearly this is evidence of a mid-cycle slowdown. The only question now is do we see a pick up in the second half and so far the economic data to date doesn't suggest that."
- "You might have some analysts come out and talk recession, talk about a double dip. Right now none of the forecasts even come close to that but this is weak data"
"The economy is weak, and it's going to stay weak, and it's going to stay weak for a while because we are in the process of deleveraging and this is what deleveraging looks like. To get the economy moving forward the way it should requires a reform of the tax code that will lower rates and broaden the base and favor investment over consumption. Efforts to try and put Humpty Dumpty back together again to have the economy we had before is not going to work.
"I'm not going to say there can't be any growth in the second half of the year. Remember the fiscal stimulus has petered out. You don't have the Fed's QE2 pushing liquidity into the system and you have slower growth globally. It's hard to add these things up and say that the U.S. economy is going to accelerate in the second half of the year."
Commonwealth Foreign Exchange
- "Very weak number in GDP. The headline was well below forecast and surprisingly we saw very large downward revision to Q1's data. So it looks like a lot of this was driven by a sharp falloff in consumer spending in the second quarter, which only rose by 0.1 percent. Overall, a very weak number. The dollar is kind of choppy at this moment. It appears to be holding steady against the euro and coming off against the yen. We've seen yields in the U.S. fall pretty dramatically. We're seeing a little bit of flight to safety and that might ironically provide a little bit support for the dollar."
- "The advance estimate of Q2 GDP of 1.3% annualized falls short of a 1.8% market consensus, and with Q1 revised down sharply to a meager 0.4% increase from 1.9%, and more negative revisions further back, the picture is of a recovery that has lost momentum after a promising spell in late 2009 and early 2010. Yr/yr GDP has slowed to 1.6% in Q2 from 3.5% in Q3 2010. The main reason for the Q2 disappointment was that consumer spending (which is 70% of GDP) managed only a 0.1% increase, some of the weakness there temporary due to supply shortages in autos but even excluding autos underlying demand looks weak. Within the consumer spending breakdown durable goods fell by 4.4% but the rise in non-durables was only 0.1% and services rose by only 0.8%, the latter broadly consistent with real disposable income, which rose by 0.7% for a second straight quarter, restrained by rising energy prices. The savings rate edged up to 5.1% from 4.9%, but with Q1 revised down from 5.1%, was unchanged net of revisions."
- “Will need to reexamine our growth estimates for the second half” after 1Q and 2Q GDP data, writes fixed-income strategist Adrian Miller at Miller Tabak Roberts in client note.
- “Growth remains a significant concern,” Miller writes
- Economy “continued to experience significant drag from the decline in government spending as Q2 recorded an additional decline of 1.1% in public spending led by a -3.4% decline from state and local governments,” Miller writes
- Still, he notes “We saw some positive signs of growth toward Q2, such as business spending and net exports”
Bloomberg's TJ Marta:
- GDP data shows U.S. consumers are on their backs with 0.1% personal consumption growth weakest since recession
- 1.3% 2Q growth driven by rising inventories, trade; without those, growth only 0.5%
- Rising inventories not a good sign; suggests consumers not buying as much as retailers
- Can’t rely on trade going forward given global central bank tightening and moderating global growth as well as austerity measures in much of Europe and the U.S.
- Suggests yields may fall further going forward; a “bull flattening,” with longer yields falling faster than shorter maturities, similar to Japan during its “lost decade”
- “Q2 GDP came in well below expectations, and Q1 was revised from +1.9% to 0.4%.
- Q2 GDP is much weaker than expected, and history looks bleaker out the back window,” writes Ward McCarthy of Jefferies & Co. in client note.
- He plans to revise his GDP forecast lower because “the trajectory of growth going forward looks bleaker”
- “The bottom line is that the economy now and previously was weaker than data had suggested was the case,” McCarthy writes
- The U.S. continues to dig out of a deep hole, but we are making significantly less progress than it previously appeared to be the case,” he writes
From Goldman Sachs:
.... (for now)
As for the humor from Joe LaSagna... we can't wait.