Charting The Paradox Of Surging Q3 GDP

Tyler Durden's picture

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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prains's picture

Somewhere in between the two is where the unicorns grow

MillionDollarBonus_'s picture

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.

pupton's picture

Is this guy for real, or is this just his "Shtick"?

Endgamer's picture

He is JMK's colon.  I am FAH's complete lack of surprise.

whstlblwr's picture

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.

eureka's picture

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?


pupton's picture

Uhhh, we all know that is a trick quesiton and the anser is "C" all of the above.

whstlblwr's picture

No C answer is inflation.

11b40's picture

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.


Bartanist's picture

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.  

AbelCatalyst's picture


Here's a snippet from

"...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...     



Au_Ag_CuPbCu's picture

I believe it is his Shtick, and let me tell you, evey now and then he comes up with some really funny shit.

whstlblwr's picture

You have easy sense of humor. Knock, Knock

qussl3's picture

1991 - 1997 does support that assertion tho.

quintago's picture

Not unicorns, visa and mastercard. Look at V for Vendetta's numbers today...

slaughterer's picture

Looks like they are trying to pull a 1991 on us. 

pupton's picture

Other than the divergenece on the chart in 91, do you know what happened back then?

Libertarian777's picture

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.

Snidley Whipsnae's picture

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.


11b40's picture

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.

DormRoom's picture

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%!

GeneMarchbanks's picture

Via Shadowstats:

September’s Annual Inflation: 3.9% (CPI-U), 4.4% (CPI-W), 11.5% (SGS)

the grateful unemployed's picture

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

machineh's picture

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!

TheSilverJournal's picture

It looks like a case of an inaccurate deflator.

DormRoom's picture

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.

GeezerGeek's picture

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.

Spastica Rex's picture

What is "non-alcoholic beer?"

JohnG's picture

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.....

MJ's picture

First thing I thought of.  Well done.

Mr_Wonderful's picture

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.

lolmao500's picture

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.


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.

Sir Real's picture

Yes they have.

Debt re-payment is optional. 

Thank you Greece for showing us the way;-)

Live for today because tomorrow is tomorrow.

espirit's picture

+1 Yes, and yes. Buy now, and let someone else take a haircut on your debt later on.

Live, laugh, spend - Bitchez.

11b40's picture

BUY NOW!......for tomorrow you may have no credit.

GeneMarchbanks's picture

GDP numbers are nonsense unless from shadowstats...

Back to Europe where the magic just keeps going in time for the holidays:

CrashisOptimistic's picture

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.

BillyTheBlade's picture

Unsustainable.  Consumer spending is set to fall off a cliff to bring it in-line with where it should the crapper along with the economy.

Turd Ferguson's picture

1991 all over again?

drivenZ's picture

that's what it looks like to me.

BillyTheBlade's picture

What was 1991 exactly?  I was a little young then to pay attention to or understand these matters.

GeezerGeek's picture

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.

pupton's picture

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?

GeezerGeek's picture

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.

BillyTheBlade's picture

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!

Hero Protagonist's picture

As long as someone invents another catalyst maybe so...


...however, something tells me that solar, wind, green energy,  != Windows, Internet,

BillyTheBlade's picture

So there is some benefit to "Retail Therapy". 

Jumbotron's picture


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.