Goldman On GDP: Warns Of Q1 Weakness; Autos Added 0.3% To GDP

Tyler Durden's picture

When commenting earlier on the GDP number we noted that the sellside brigade is about to start coming out with Q1 GDP "warnings" now that inventories will likely subtract between 0.5% and 1% from growth in the current quarter. Sure enough here is Goldman with the first warning saying that "The composition of growth was slightly negative for the Q1 outlook, in our view." That's not surprising. What is is that also according to Goldman, the auto sector contributed 0.3% to the overall GDP number. Which means that ex inventories and autos (sold courtesy of NINJA loans provided by Uncle Sam as discussed extensively every month with the release of the Fed's Consumer Credit number), the US economy grew a meaningless 0.5%! And this in the quarter when the US economy was supposed to be on a tear. We are now fairly concerned that there is an outright chance of economic contraction in Q1.

From Goldman:

BOTTOM LINE: Q4 GDP growth slightly worse than expected. Compared to our forecasts, details showed more inventory growth, less consumer spending and less business investment.

1. Real GDP increased by 2.8% (annualized) in Q4, a bit weaker than the consensus had expected. The composition of growth was slightly negative for the Q1 outlook, in our view. Growth in domestic final sales--GDP less inventories and net trade--was just +0.9%, in contrast to our expectations for +2.0%. The weakness reflected: (1) slightly weaker than expected consumer spending of +2.0%; (2) weaker than expected business fixed investment, reflecting a 7.2% decline in structures investment; and (3) a 12.5% contraction in federal government spending on national defense. National defense spending tends to be volatile, and we would therefore discount this component as a signal about the near-term growth outlook. The misses on consumer spending and business investment are arguably more meaningful.

2. Among the other details, inventories increased by $56bn during the quarter, adding 1.9 percentage points (pp) to GDP growth--much more than we had expected. In contrast, net exports actually subtracted 0.1pp from growth. We had forecast a positive contribution from net trade of +0.5pp. GDP excluding motor vehicles increased by 2.5%, implying that the rebound in the auto sector added 0.3pp to growth.

3. The GDP price index increased by just 0.4% (annualized) in Q4, far below consensus expectations for a 1.9% increase. Nominal GDP growth was therefore quite soft at just +3.2%. The core PCE price index rose by 1.1%, slightly above consensus forecasts.

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Jlmadyson's picture

Goldman 2011 will see 4% growth Goldman?

Preach on brother man.

Silver Bug's picture

Once again, never listen to anything Goldman has to say, this is another prime example.

trav7777's picture

the financial system trafficks in lies

Thomas's picture

And it will get worse as we head into November.

Captain Kink's picture

Imminent recession => QE3 by/at March meeting.


Captain Kink's picture

What's not priced in is $1,000,000,000,000 in mortgage purchases.  Over perhaps 1 year. And we know from looking at hyperinflationary episodes in the past that the equity markets explode higher before the endgame ensues.  It is not about inflation yet though, but rather the change in the rate of growth of the money supply (It is really the second derivative that matters most here.). Hyperinflation is a long way off. 

China has been curbing the growth rate (if not outright reducing its organic money supply) over the recent past and "succeeded" in reducing inflation (if you believe their numbers) from 6.5% to 4.6%.  They are now re-ramping growth.  As is Brazil.  And Europe (post Trichet), which just added 1/2 Trillion Euros to the banking system, whether or not you believe it is in their economy yet.  And Japan?  Just entered deflation...what news do you expect from them? The fact is that the spigot is on full fire hose blast from every corner of the world, and there is no way that a lot (if not at least some) of that money reaches the US market as the only wearable shirt (for now) in the hamper.  Add to this the FACT that QE3 of $1 T in mortgage purchases is on the way.  The Fed has us conditioned now to expect that QE means higher markets--equity and commodity--so the reaction is and will become even more, EXPLOSIVE. 

The Fed gave us the Jackson Hole speech already.  The new inflation and (soft) unemployment targets will demand that they act.  It is out of their hands...inflation, (as they measure it) is too low...and at the same time, unemployment is too high.  This is the genius of the targets regime. QE3 is a foregone conclusion, and it will be HUGE.  QE2 was the test run, and the Bernank was practically gloating when he asserted that the commodity price effects were"transitory" as evidenced by the price behavior in the markets.  They did the 600 billion test, now they have license to print $1T every time the "inflation" rate drops below 1.5%   Bank on it.  And buy silver and gold and Equities...and the Russell.


maxcody's picture

Goldman would downgrade it's mother or to buy?

francis_sawyer's picture

implying that the rebound in the auto sector added 0.3pp to growth.



Chevy Volts stacked up on car carriers sitting on miles & miles of unused Burlington Northern railroad tracks = BULLISH

Krugman is now busy vectoring the "sales" of these Volts to the aliens (who plan to BUY them right after they blow the world to smithereens)...

holdbuysell's picture

But...but...Goldman said yesterday to buy the Russell 2000.

fonzannoon's picture

Can someone please let me know if the fact that the NAR was double counting real estate sales for 5 years is considered in the GDP data released?

Cognitive Dissonance's picture

Now that the Dec 2011/Jan 2012 stock market pump is just about done (meaning the last of the greater fools still around has piled in) it's just about time to 'adjust' forecasts for what was clearly obvious by Nov of last year.

Real nasty storm on the horizon Ma and Pa. You best head for the storm cellar out back real quick.

Run and hide

Mr Lennon Hendrix's picture

People are doing great!  They love this ride!  You know why?  In part because yes, stocks have rebounded, but also because of the thrill that comes knowing it could all crash any minute.  People love this shit Cog; they love the fact that they could lose it all on one roll.

Mr Lennon Hendrix's picture

Toto is pissed because Dorathy didn't take the silver slippers off of the wicked which when she had the chance.

Captain Kink's picture

Toto was put down because he pissed on the bed.  Sorry.  No more Toto.

Any canine smaller than a bread box doesn't really count anyway. 

And, he was delicious.

Don Birnam's picture

"Storm ? Bah ! Such hooey ! Nothing a little bit of printing can't soothe."

-- Almira Gulch,

Vice Chairman-Designate, Federal Open Market Committee.

Cognitive Dissonance's picture

The music that was playing in that scene popped into my head as soon as I clicked on your image link.

Too funny. I just had to post it up. Thanks.

Which witch

Don Birnam's picture

Ol' Almira was first to pop into the Birnam cocoanut when I viewed your b&w image of a storm cellar. Government work is truly her calling, as she has a history of familiarity with tornadic storms...although, with mixed results.

Touche, CD !

trav7777's picture

been hearing that "the crash" is coming for years now...this IS the crash.  We're living it.

In the future, the kids will read about it and think that it took 10 minutes because that's the time it took to get through the paragraph on it.

WonderDawg's picture

I agree with many of your posts, but this is one I have to disagree with. This is the prelude to the crash. We'll know when the crash hits, and it will be epic.

Are you kidding's picture

I think Trav is right...we're in the "crash" yet gov borrowing is keeping everything running like we aren't. The trillion a year they borrow is what is keeping all the payments being made. When/if that money stops, the crash that has been postponed by the government pumping in money, finally completes. Look around, instead of soup lines there are 50 million SNAP card holders. We have section 8 instead of "camps". What happens to those people when the govt checks stop?

5880's picture

Sell in May?

Sell now

GMadScientist's picture

Autos added 0.3%...

Ford is down 4.5%...

Mr Lennon Hendrix's picture

February is going to be a helluva month

gigeze787's picture

So, the only real question is how close to the preliminary (corrupt, sugar-coated) miserable Q1 GDP report in April will Bernanke's QE3 announcement come?

ZH should do an online bet on this, with betting results displayed in graphical form for the world to see.

Cruel Aid's picture

You're right, the only question is when, considering GDP contraction is on the table.

WonderDawg's picture

It's already underway, and they don't call it QE3. Those waiting for QE3 to be announced will be disappointed; the Fed knows the public has no appetite for another QE, so they just do it behind the scenes without announcing it as such. And by the way, it's priced in.

Captain Kink's picture

This market breaks out above 1370-75, the money will start pouring in.  There is so much cash out there, and people are greedy and stupid.

Dr. Engali's picture


  " BOTTOM LINE: Q4 GDP growth slightly worse than expected."

For cripes sake. Everybody and their brother knew that the fourth quarter was going to suck. How about trying this: Instead of the perma bull crap be honest with your clients and give them some sound advice. Stupid fuckers.

mayhem_korner's picture




I think you are most generous, Dr. Engali.

Dr. Engali's picture

Yeah you are right there. Sooner or late the "I'm with Goldman" moniker is going to wear off.

adr's picture

Everything is fine! JC Penney voluntarily gave up 40% margin becuase they are just making too much damn money. It has nothing to do with not having any customers, or customers only buying product with a 70% sale sign. You know what happens when you make $20 the retail price instead of $40? The consumer expects to pay $15 now. I've never paid over $20 for a shirt. Most of the time I pay about $10. Why? because I know the stores only paid $5 for them and I won't give them $50-70. I know that if I wait a month or so, nearly the same ammount of inventory will be on a sale rack for 50% off and a few weeks after that the remaining inventory will be 75% off with an extra 10% on the weekend. More and more consumers are catching on. Great for sheeple, bad for Wall Street ramp jobs.

Irish66's picture

JCPenny and Sears should combine

monopoly's picture

"NINJA Loans". Too much Tyler. lolol

Money 4 Nothing's picture

Old Mortgague application term, No Income No Job Application, just stated income on the Mort. application with no W2 required.

aka "Creative financial products" thanks to Goldman Slacks, Cuntrywide, JP Morgue creating the CDO's from Hell.

GMadScientist's picture

Banks do it all the time, why can't we?


mayhem_korner's picture



On the brighter side, I'm hearing that pepper spray sales were flush.

GMadScientist's picture

Add in gasmasks and Kevlar and call it the RIOT ETF.

mayhem_korner's picture



2011 U.S. Gross Domestic Product Growth = 1.7%*

*with channel stuffing

2011 U.S. Gross Debt Production Growth = 11%**

**with CB stuffing

SDRII's picture

Since inflation is obviously under reported you can take their 0.5% estimate and put a negative sign in front of it. the only upside was that utilities was a drag on the warmer weather and the next AFRICOM campaign got pushed out into Q1 on the defense side. Nigeria now slated for a late Q2 push...

Eally Ucked's picture

"The weakness reflected: (1) slightly weaker than expected consumer spending of +2.0%" so population is growing at 1% clip and normally with stagnant economy good citizens don't change their spending patterns and sales should be stagnant too (sales growth = population growth). Employed work force is shrinking, wages are going down, it should probably subtract 1% from sales, final result should be 0% growth in sales. Now taking in consideration inflation from official data at around 3.5% then sales growth should be around that number (just to keep status quo) that means to me that real sales are shrinking by 1.5% or so. Maybe I'm making some logical error in my estimate? I think that 2% growth is still too high and in reality banks are shopping around by giving loans to overstretched consumers.  

junkyardjack's picture

In layman's terms this means buy with both hands right?

navy62802's picture

Eh who cares. They'll just fucking print print print until the mother fucker burns to the ground. That's about all there is to say. And we all know it's going to happen sooner or later.

Taffy Lewis's picture

I don't understand the fuss; the Washington Post:

US GDP grew at fastest pace in 1.5 years in fourth quarter 2011

"The nation's on-and-off economic recovery has picked up its pace, the Commerce Department reported Friday, with the US economy growing at an annualized rate of 2.8 percent for the end of 2011..."

I don't see the pictures of unicorns shitting Skittles, though.

Maybe I should tune into ABC News to get the real truth (/sarc)