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Charting The Paradox Of Surging Q3 GDP
We have previously presented the correlation of US consumer confidence and spending in the form of retail sales, leading us to wonder how it is possible that "The More Depressed And Broke US Consumers Are, The More Worthless Trinkets They Buy." Following today's GDP data it is not difficult to see where this post is headed. As we noted earlier, the biggest contributor to the 2.5% annualized GDP spike (the biggest sequential surge since Q4 2009), was Personal Consumption, i.e. consumer spending. This is for the quarter ended September 30, when the market plunged to 2011 lows. It is also the quarter when consumer confidence collapsed completely. And that is what we are showing. Courtesy of John Lohman, we present the correlation between US consumer confidence and the main driver of US GDP growth. Of course, if one assumes that consumer confidence is the true (and leading) data
series here, it means US GDP would have declined at a roughly 3% annualized rate. Credible? Realistic? China-inspired? We leave it up to our readers.
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Somewhere in between the two is where the unicorns grow
This chart indicates a SURGE in consumer confidence as that spread reverts to normal. This is the time to buy retail stocks. I just KNOW it.
Is this guy for real, or is this just his "Shtick"?
Shtick.
He is JMK's colon. I am FAH's complete lack of surprise.
Probably spends hours try to be clever. Pass it by like all us do.
But everyone here must be thankful to centrally planned bankers who help their banker buddies at expense of people. Look at Goldman Sachs, last two days, and at gasoline price. Thank you Obama, thank you Bernanke, thank you EU for fucking the people.
Poll show most people in this country don't care about stock market, but care about gas price. This will make easier for Ron Paul election. Keep going.
Or - two alternative explanations:
A) US government is evil - lies, and manufactures GDP data as "needed"
B) US consumers are idiots - and, really DO spend, even when depressed - or even more so when depressed, i.e. compensatory and self-destructive behavior a la "let's party cause we're all gonna be broke and or dead next quarter.
So - which is it?
Uhhh, we all know that is a trick quesiton and the anser is "C" all of the above.
No C answer is inflation.
None of these is mutually exclusive. Just keep adding to the list.
Remeber, too, you can buy a lot of trinkets at the mall if you skip the house payment.
Actually, I think that you have it. Normally inflation is subtracted from the gross GDP figures to get "real" GDP. However, we have seen a lot of data suggesting that inflation is "under calculated" becaue of the exclusion of food and energy and overweighting of housing.
Sure it is very possible that our government would simply lie. However, if they just calculate the numbers in a way that yileds the result they want, then they don't really have to lie, just change the definition of truth.
My guess is that is the numbers are not just simply taken at face value and instead given a sanity test, the resultin chart would be better correlated.
Here's a snippet from www.Consumermetrics.com:
"...per-capita disposable income...was reportedly shrinking at an annualized -1.7% rate during the third quarter (and a -2.32% annualized rate using the BLS CPI as a deflater)."
So, consumer confidence is at almost historic lows, salaries are dropping like a rock, price of gas is rising again, and gross margins are being squeezed like there is no tomorrow. And this all leads to consumers spending like it's 1999?? Something does not smell right - maybe consumers are self-medicating with big screen TV's and iphones, but I'm not betting the farm on this one...
Remember that bear market rallies always end with GOOD news - once the good news is priced in all the buyers are gone and look out below... Now it's reality time - all the rumor cash just got suckered into the market...
I believe it is his Shtick, and let me tell you, evey now and then he comes up with some really funny shit.
You have easy sense of humor. Knock, Knock
1991 - 1997 does support that assertion tho.
Not unicorns, visa and mastercard. Look at V for Vendetta's numbers today...
Looks like they are trying to pull a 1991 on us.
Other than the divergenece on the chart in 91, do you know what happened back then?
according to the BLS, if (rare) unicorns go up in price, they don't exist, because people will substitute horses which are cheaper, so there is no price increase.
I haven't heard the old saw "Pent Up Consumer Demand" that was rolled out by main stream media in past recessions... But I no longer watch MSM.
If there was a real recovery in personal consumption going on wouldn't I see more people shopping... around here stores/malls are almost empty...with many boarded up.
Let me tell you what else was empty this past week......reports are coming to me that the semi-annual Canton Fair was the deadest EVER. Europen buyers were few and far between, and the American contingent is down, too.
Plus, get ready for more price increases. The buzz from China is that between labor and currency adjustments, expect jumps nearing 8% very soon, with more to follow.
If inflation is pushing up prices, thereby pushing up nominal prices paid for PCE component, it could explain the bump.
I read that if we were using the CPI model used in the 80s, CPI would be printing at an annualized rate of 11%!
Via Shadowstats:
September’s Annual Inflation: 3.9% (CPI-U), 4.4% (CPI-W), 11.5% (SGS)
core number was 2.2%? but there was an outlier in Apparel which was running about 1% consisently and suddenly threw in a minus 1%? take that away and core and headline are very close
Even according to official data, CPI-U accelerated 2.9% annualized, from the 3 months ending in June to the 3 months ending in Sept. [Table 2, latest CPI report].
At the same time, BEA claims that the GDP deflator DROPPED by 1.3% annualized.
While there are some differences between CPI and GDP deflator, in this case we've got a 4.2% spread between them, and THE SIGNS DON'T EVEN AGREE.
Conclusion: the flash GDP report has been 'shaked 'n baked,' Soviet style. The tills are thronged in the Consumers Paradise, comrades -- never mind your lying eyes!
It looks like a case of an inaccurate deflator.
It's phantom growth. If Q3 GDP was growing that strong, jobless claims would likely be trending down, not stuck above 400K. I call bullshit on the headline data.
The SGS number seems correct to me. Yesterday I bought a 12-pack of my favorite non-alcoholic beer. The price had risen to $10.49 from a previous $9.49. That's around 11%, right? Time to switch to beer with alcohol; at least it'll make me numb to these price increases.
What is "non-alcoholic beer?"
O'doules, or Nobeer (actual brands) aka water. And taste like it.
I like beer, it makes me a jolly good fellow,
I like beer, and sometimes it makes me feel mellow.....
http://www.youtube.com/watch?v=8i5k4I1AOEI
First thing I thought of. Well done.
Yeah, it´s most likely inflation. Also, who knows, the govt. beancounters could have adjusted the computing methodology.
In such a debt-laden economy anything under 5% growth probably constitutes recession, for all practical purposes.
Growth on personal consumption...
Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 2.2 percent in the third quarter, compared with an increase of 1.0 percent in the second.
except...
Current-dollar personal income increased $29.5 billion (0.9 percent) in the third quarter, compared with an increase of $145.7 billion (4.6 percent) in the second.
Disposable personal income increased $17.0 billion (0.6 percent) in the third quarter, compared with an increase of $110.5 billion (3.9 percent) in the second. Real disposable personal income decreased 1.7 percent, in contrast to an increase of 0.6 percent.
People are buying on credit again. They have learned NOTHING.
Yes they have.
Debt re-payment is optional.
Thank you Greece for showing us the way;-)
Live for today because tomorrow is tomorrow.
+1 Yes, and yes. Buy now, and let someone else take a haircut on your debt later on.
Live, laugh, spend - Bitchez.
BUY NOW!......for tomorrow you may have no credit.
GDP numbers are nonsense unless from shadowstats...
Back to Europe where the magic just keeps going in time for the holidays:
http://www.bloomberg.com/news/2011-10-26/euro-rescue-fund-chief-goes-to-...
This is not a Shadowstats thing.
This is gasoline and food. Gasoline is up 23% from this time last year.
Spending on those are up sharply from last year. But rent holds down the inflation number for overall adjustment purposes.
The result is apparent increases in spending well beyond "inflation". This yields a GDP increase.
Unsustainable. Consumer spending is set to fall off a cliff to bring it in-line with where it should be...in the crapper along with the economy.
1991 all over again?
that's what it looks like to me.
What was 1991 exactly? I was a little young then to pay attention to or understand these matters.
The George H.W. Bush mini-recession was right around then. The MSM made a big thing out of it even after it ended. "It's the economy, stupid" got Bush 1 kicked out of office (good riddance) and Willie Clinton elected. The latter was much more entertaining, in a sick sort of way.
So are you saying that in 1991 the economy and consumers perceptions (confidence) of it were "talked down" by the MSM in order to slay GHWBush in 1992?
That may be true, back then, but do we really think the consumer confidence is being artificially talked down now? Or, is it that 9% unemployment (Gov't stats are low too), housing bust, record deficits, Massive bailouts, Europe on the brink, etc, etc, etc. are REAL and that consumers have a good reason to be afraid. If so, they why are they (allegedly) out spending their money? OR ARE THEY??? Is the author implying that the data do not support each other and we should be suspicious?
I was only talking about 1991-1992. The recession ended even as the MSM railed against Bush prior to the election. I don't recall Clinton, after assuming office, blaming everything on Bush 1 because by 1993 things had gotten better and continued to improve. Now it seems to be the opposite. Everything the MSM comes out with appears intended to make us feel better, not worse. Look at all the hoopla about Obama's worthless plans for mortgage refinancing, student loans, shovel-ready jobs, etc. None of his plans were worth the newsprint wasted on them. I suspect that if this were Bush 2 part 3 (good riddance to him, too) the MSM would be trumpeting the SGS statistics as an indication of how bad things really are. Common thread: MSM loves Democrats, hates Republicans, even the Bush RINOs.
I'll end this clearly: be very suspicious of everything you hear or read, whether it's from the MSM, the Feds, or even ZH.
Thanks for the explanation. Obama is and has been a complete disaster of failures and corruption to the extent we have never seen. If all we had to go off of was MSM, everything would seem to be as right as gumdrops and rainbows. Thanks god for alternative media sites, such as this one, which gives us the straight scoop!
As long as someone invents another catalyst maybe so...
...however, something tells me that solar, wind, green energy, et.al != Windows, Internet, et.al.
So there is some benefit to "Retail Therapy".
Simple.
100's of billions of dollars from government hand-outs and people not paying their mortgages for up to 3 years flooding into the consumption machine that would otherwise come out of their ever-dwindling pocketbook.
Oh...and what lolmao500 said...... Credit Cards i.e., Debt Serfdom.
Aren't consumers deleveraging themselves at a wicked pace?
Hard to do that in conjunction with buying lotto tickets and some pepperoni pizzas from Dominos while real wages are declining.
But, hey, we're all gonna have a Merry Christmas this year, eh?
We live in a fantasy world now... up is down and down is up...
world GDP57 trillion
J P M / goldman sac leverage derivatives 75 trillion
does it realy matter at this point ?
GDP is basicly a measure of money changing hands. The money supply surged 3x faster than GDP. You can't really look at anything but employment to get an accurate understanding of the economy anymore. The economy is people working, not money being created and spent on things that are rising in price. You can raise the GDP by printing. When gum is $1 a stick, GDP will be up huge.
And when people realize those "100 calorie" packs are not for their benefit and are only a snazzy way to hide value deflation even more will stop believing this claptrap.
pods
you can also raise GDP by having hyperinflation, breaking windows and going to war.
This is exactly why Austrian economics says GDP is a dumb indicator. It doesn't measure anything.
e.g. if i buy your car for $1,000 and sell it back to you for $1,000, GDP shows +$2000 in economic activity. Does that mean either of us, or the economy as a whole is improving economically? Krugman would say "YES!".
Cash for clunkers is a very good real world example. Government taxes us $3bn, so it should be -$3bn to the 'GDP' indicator.
Then those funds are spent to buy new cars. Say there are zero transaction costs/fees. so +3bn to GDP. So GDP is net zero.
Now subtract all the cars that were still useable but were scrapped (690,000). lets say those cars were 'worth' $2k each. So effect on 'GDP' is -$1.38bn.
So cash for clunkers reduced economic activity by $1.3bn but is sold as a $3bn injection into the economy, yet Obama wonders why unemployment is 16%.
Not sure the point you are trying to make.
But when the G D P and the Debit are the same .. or for debit is higher then the G D P This is would be a good barometer to understanding there is not out put of new growth or growth is flat paying off debit.
retraction in growth do to weather or other variable changes are still reflected in GDP
Home squatters. Spend spend spend until you get kicked out.
Probably more of a $100 dollar grocery bill is now $125 for the same amount of stuff.
pods
actually, it is still a $100 but for less stuff. A 5 lb. bag of sugar is now 4 pounds still at $2.99, Orange Juice is moving away from half gallons and going to 59 oz. for the same price, hell, even Ben and Jerry's is now printing on their containers "Still ONE Pint", as Haagan Dazs is now 12 oz. I think.
It just goes unnoticed by most as they go "Didn't I just buy ....."
I think I paid $5 for a gallon of milk, DAMN!!! I am now switching to breast milk only!!!
Breast milk will cost you more than $5/gal after child support...
Perhaps either the blue leg is going to catch up with the red one - simple one, or there is more than the consumer confidence in this interconnected (and depressed from the last Great recession) world that determines GDP (a more complex reason). People might be getting used to the new normal or crap around them and resumed buying things regardless. Kind of like the price of oil in 2004-5 when it went above 40 for the first time - everyone said it was the end. Now if the price is closing on 70 people say it is the end and wish it to go back into a "healthy" 90.
Also - low interest rates as a result of a downgrade and a following flight to quality spurred consumers/corporations to go on a buying spree.
Americans are exceptional at buying things they don't need with money they don't have.
On a less sarcastic note it would appear Bernankes wealth effect had an impact. The upper 20% of the US population accounts for between 45%-60% of spending.
One only has to look at luxury, to note the correlation.
The whole point of TARP and Bernankes alphabet soup of bailouts was to get things back to the "way they were"as quickly as possible. Even though the euphoria "the way thing were" in the Western World from 2000-2008 was mostly built on a house of cards.
So 9m middle class people lost their jobs. Cost of "getting things back to normal". Someone had to pay. You didn't think it would be those that keep the US economy ticking with their consumption, did you?
Let me throw out a better explanation. This chart does not show one thing. The psychological change that occured in people then. There actually was a spike in spending on this collapse. It was everyone stocking up on bullets and generators and junk like that.
You're actually showing a period of time where people did have a huge collapse in confidence and yet they still bought 9 blllion bullets that year and god knows how many freaking guns.
And firearms, gens, & 3k gallon water tanks are durable goods. Perhaps a 'preppers bump' to GDP - which will fall off a cliff once people are better stocked and sit tight in a mentality of lower consumption, weighing wants & needs, and continue to service debt. Not a bad thing, just misinterpreted by W$.
Obama's election was great for the firearms industry. Even before he got inagurated sales went way up. A friend bought a DPMS .308 in August 2008, no waiting. By January 2009 the waiting list was over six months long. That was, I recall, a great time to own the stock of S&W or Ruger, although I didn't check that factoid.
How much legs do you think this rally has?? I give up trying to figure this out.....
this is due to all the guns, lead, water, rations, gold, and silver people are buying, and at higher prices.
Not even statistics will be able to hide the ugly truth when consumers either choose, or are forced, to throw in the towel.
I wonder what problems will be addressed at that time? But, there's nothing 10s of trillions of FRNs can't fix..
Could it be that people just don't give a shit anymore?
The answer to this paradox may lie in the fact that they are using wrong GDP deflators, which means consumer is forced to spend more due to increasing inflation but courtsey of the wrong deflators used a part of the inflationary rise is shown in the real GDP
The GDP number maps the retail number which is primarily driven by chinese buyers. It would be interesting to chart chinese top earners' confidence level with US GDP.
Often when a single obvious reason for any situation cannot be found it is because there are many smaller forces at work, all happening to be pushing in the same direction. My list of suspects; tinkering with the data, squatters rent, low interest home equity loans to those qualified, Hurricane Irene, fungible student loans and maybe a little pent up demand coinciding with some retailer clearance pricing.
anecdotally things really suck out there. wonder how many I thingies Bernanke bought last quarter?
So charting consumer confidence has been directly following consumer consumption accept for this quarter.
Is their a single thing that we can believe that the US square heads tell us ? Another lie fed to us.
Consumer spending is going up because PRICES for everything people need are going up. Read the earnings reports, and nearly every company has risen prices. Volume bad, prices up. Trinkets are for the wealthy. Regular people need healthcare, schooling, food and gas.
The Xmas shopping propaganda machine will be fullblast and beyond...Health & Safety Tip to You and Yours: Stay far away from Black-Friday and the insanity that comes with...Fist fights, knife wounds, gun point come to mind...Don't want anybody out there in ZH land to lose a valuable
Does "consumer spending" include property taxes, tuition, water and sewer fees, electricity, gas, heating oil, etc. If so, I can see why consumer spending is up. Everything associated with government or its minions (law, medicine, higher education) is rising at 10% annual rates or more.
RECORD HOLIDAY SALES COMING; ALL IS RIGHT IN THE WORLD.
BTW; Anyone one need some really cheap lots in the Evergalades or a rusty bridge in Brooklyn?
Wake me up when they fix the government calculator; it seems to be missing some digits.
invest in bread and circus you cannot lose
Bread and circuses you can believe in
there are no elephants
at the circus...
and the bread
is moldy...
how about putting up a chart of states counties, and cities, tax and other fees revenue collections, you will not find a circus in those numbers, as they are heading for the deep six.
Hi, you'll have to forgive my ignorance as I'm in no way involved in economics.. I just stumbled onto the site.. Totally appalled and too confused to draw any conclusions. There are some saying that you are all "bearish" and contrarian. I too, don't know whether to think you're a bunch of diversion bafoons contriving an after-the fact argument every time the indexes rise (i.e. whether you're paid to do this) or whether the world is ran by those other evil demons, the Euro ones at the moment.
So. I plead you, tell the average person, is what you're saying true?
you don't need to be an economist, trader or "insider" of any sort to see reality. all you need is the desire to spend some time self educating on the basics, then apply some critical thinking skills to the difference between the MSM hype and spin and the reality that is staring you in the face around you. hunt down the data as undiluted as possible by the media whores, and apply that to what you see and experience in your everyday life, take an interest in your surroundings. how many homes and shops are for sale and for how long have they been on the market? how many people do you know are unemployed, what type of jobs are being advertised and for how long have they been re-posting the same jobs over and over? there are many different sources right in your own community that will give you a good measure of the difference between the economic reality of America and what the matrix would like you to believe.
Watch CNBC and Bloomberg stories to get 'the official' take. Then come back here as Tyler and the others drill down into the numbers and see if the conclusions are different. You can weigh the findings yourself for 'the truth'...
And I mean, every story. Try it tomorrow. You'll be talking economics and politics in no time! You'll be able to bring a room to a standstill with one statement. DO IT, it's fun! You're banker friends will be flushing red and those that ignore your new-found truths will only be able to do so after hearing the concussion-grenade high-pitched 'eeeeeeeeeeeeeeeeeeeeeeee' sound that occurs after you hammer their beliefs like a nail!!
There is no paradox. People just see the $ going worthless, so they buy while they can.
I thought it was a cost thing. Goods cost more (nominally) and spending increases. Krugman and Bernanke are just so smart.
C+I+G+(X-I) all adjusted for inflation. So many letters to manipulate, so easy to get the result you want. But just remember, you can't get too much G, never enough G in the equation.
This is an era where you can be looking right at something and the government and media try and tell you that the thing you’re looking right at is not what it looks like.
We don’t have a single net job in over 10 years. Never happened before. There were millions more jobs in 1940 than 1930. Millions more in 1980 than 1970. The shittiest decades produced millions of jobs.
And now in the era of outsourcing and free trade agreements, we don’t have a single net job in the last decade.
Last month’s unemployment report wasn’t even hedged by the media, it was proclaimed as outright “good.” 103k jobs “created,” and yet 45k of those were just Verizon workers returning from strike, leaving 58k jobs. That’s less than the growth in the labor force. U6 went UP. Manufacturing jobs were LOST.
And yet this is good.
We can’t discount the fact that the guy in the White House represents the culmination of all the hopes and dreams of the mainstream media. This is the Barack Obama Era. And in this era the bar has not just been lowed to the floor, a 5,000 foot pit has been dug and the bar has been placed at the bottom of the pit.
Bad is declared outright good.
Nobody is going back to work, and those who are working are seeing declining wages battling a tidal wave of undercounted inflation. And we’re told this is good.
When gulfs widen, societies implode. The gulf between the have and have nots is ever widening due to the actions of the private banking cartel that disguises itself as a government agency. The gulf between what people earn and what they can buy with it is ever widening. The gulf between what people see, feel and can touch in their everyday lives and what the media is telling us ever widening.
History shows us that the real situation on the ground for people can only separate so much from the government lying and media spinning, before the politicians and power elites heads are separated from their shoulders. This is what we are heading towards.
in the 30's government actually wanted to make things seem WORSE than they were. FDR hired some photographers to document the poverty and suffering. he needed to propagandize the Depression so he could get his New Deal through. now the politicians lie the other way, but that's because of the mass media, which didn't exist then. government is always going to lie and lie in their own best interest.
every one of us is on an assembly line, we get born, move along, go to school, move along, get a job get married, consume, retire. between get a job and consume, there is money, and the job is only something which limits the amount of money you can spend. we (government) can speed up the process if they move the person on the assembly line from school to consume and forget the job station. (well its all about robotics isn't it?) they know jobs don't matter but they still have to decide who gets what (how much money they will put in your pocket when you arrive)
and right now the line is backed up, too much stuff and not enough buying power. but you can see from this chart that they are doing something about it. now consumers just need to get the message, (confidence that government will supply them with money with or without a job). from their perspective this is only a minor mopping up operation, although at 100% debt to GDP they have other problems.
FDR had all the phony jobs created by WWII, but its been downhill ever since, and they know it.
As the economy moves ever closer toward the precipice, the deluded people must enter a phantasmagorical credit binge as they are utterly incapable of imagining a better era.
Government fluff the number? Nah, that would be dishonest.....
http://confoundedinterest.wordpress.com/
Look at the charts. Real Personal Income has fallen for the last two months. So, is this sustainable?
NO!!!
One of the left's favorite words "unsustainable" oh! the unsustainability of it all has finally come home to roost.
Are we having a baby boom? Seriously, 2 births on my block this month. I see babies everywhere lately, at the elementary school, at Target, at the supermarket...
I did some quick searching around to see if I could find any stats, no luck. But I did come across this:
The Statistical Abstract of the United States, published since 1878, is the authoritative and comprehensive summary of statistics on the social, political, and economic organization of the United States.
The U.S. Census Bureau is terminating the collection of data for the Statistical Compendia program effective October 1, 2011. The Statistical Compendium program is comprised of the Statistical Abstract of the United States and its supplemental products - - the State and Metropolitan Area Data Book and the County and City Data Book. In preparation for the Fiscal Year 2012 (FY 2012) budget, the Census Bureau did a comprehensive review of a number of programs and had to make difficult proposals to terminate and reduce a number of existing programs in order to acquire funds for higher priority programs. The decision to propose the elimination of this program was not made lightly. To access the most current data, please refer to the organizations cited in the source notes for each table of the Statistical Abstract.
http://www.census.gov/compendia/statab/
Isn't this a big deal?
I've noticed it too. Everyone who hasn't maxed their EIC is trying to squirt out #3 before tax time.
I suspect that the correlation between GDP volatility and consumer confidence may be more useful, i.e. higher volatility in GDP growth resulting in lower consumer confidence as the consumer's confidence in future conditions diminishes. Certainly consumer confidence is likely to stay low given the strong likelihood that growth remains difficult to read... particularly given its dependence on monetary policy in in all key regions.
I can explain this chart:
Having sold all of their scrap gold and jewelry into a declining gold market, and buying their new iPhone 4S and/or HDTV, the consumer feels gyped, and is now realizing the larger mobile bill, cancellation fees, and/or the cable bill with the HD surcharge will come every month, and now there is no gold left to pay the monthly expenses of their new assets.
all that = no confidence
Oh, and they watch cable news - no confidence there either.
WTF
The 99% have figured out to big to fail.
If you are expecting big CE and IT sales Black Friday and for Christmas, think again, the Thia floods have crushed any bargins. Black Friday will be very Red.
health care expenses
GDP is mostly a measure of inflation, not growth.