Q4 GDP Misses Estimates, Inventory Stockpiling Accounts For 1.9% Of 2.8% Q4 US Economic Growth

Tyler Durden's picture

The US economy grew at a 2.8% annualized pace in the supposedly blistering fourth quarter, yet the number was a disappointment not only in that it missed estimates of 3.0% (and far higher whisper numbers) but when one looks at the components, where a whopping 1.94% of the upside was attributable to a rise in inventories as restocking took place. And as everyone knows in this day and age a spike in inventories only leads to sub-cost dumping a few months later. In other words, the economy grew at a 0.8% pace ex inventories. Yet for all intents and purposes, this is considered "growth." Personal consumption was also weaker than expected coming in at 2.0% on estimates of 2.4%. Perhaps the only silver lining was Core PCE which came at 1.1% on expectations of 0.9%, however as discussed extensively before, this was driven by an unsustainable surge in credit-binge spending, primarily for iStore trinkets, and is hardly sustainable especially as the US Savings Rate fell to 3.7% in the fourth quarter, the lowest since Q4 2007. In other words Joe Sixpack is living large, especially since Joe Sixpack no longer has to pay his mortgage. Unfortunately this is a collision course with every economic principle and the next taxpayer funded bank bailout is only a matter of time. Bottom line: the artificial economic pick up is over and Q1 will see inventories actually detract from GDP: as a reminder Q1 2011 GDP subtracted 1.8% points from the final 0.4% GDP, and that was following only a 0.9% inventory rise in the preceding quarter, Q4 2010. And that is not even mentioning the tight fiscal situation no longer being a benefit to growth. Oh yes, and gas is no longer falling. And not to even mention that the GDP deflator mysteriously imploded from 2.6% to 0.4%: that's odd - not even edible ipads seem to be coming down in price. Which means that using a reslitic deflator would have resulted in virtually no GDP growth. To paraphrase Lester Burnham, "It's all downhill from here."

Finally a chart of the GDP Price Index. It just printed the third lowest since 1963.

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Irish66's picture

stick the inventory on the ships, put them out to sea and count them as sold.   easy button

LiquidityandLunacy's picture

that button is getting sticky from overuse...



CPL's picture

The growth doesn't even match inflation @ 2.96%


This is going to get ugly.

SMG's picture

Nah... like reality matters.

This isn't just bullish, it SUPER BULLISH!!!!


X. Kurt OSis's picture

The breaking news from CNN said something like US economy grew at nearly 3% which economists say is a level where firms start hiring again.

So I guess CNN agrees.

Or maybe CNN/Obama's Prosperity Mouthpeice only scanned the wiki article on Okun's Rule, saw "3%" written somewhere in there, and couldn't comprehend the rest due to the mathiness...

LetThemEatRand's picture

CNBC on its website actually has a headline with the words "GDP", "grows" and "clip" all in one line.   A cursory review would suggest good news.  Gotta love big brother.

LetThemEatRand's picture

FoxBusiness has on the front page:  "The jump [of 2.8%] was the biggest since the second quarter of 2010"

SheepDog-One's picture

'Please! Rush to buy all these bubble equities!'

Thanks, your Overlords.

kridkrid's picture

That was the exact soundbite on NPR this morning as well.  It said, "a slight miss on expectations of 3%, but a huge improvement over this time last year and the biggest since the second quarter of 2010". 

LetThemEatRand's picture

WSJ online:  "U.S Economy Gathers Pace:  The U.S. economy grew at its fastest pace in more than a year and a half in the final three months of 2011, rising at an annual rate of 2.8%"

Snidley Whipsnae's picture

"The growth doesn't even match inflation @ 2.96%"


Nor does it match the 2.5% GDP growth required to meet employment requirements.

More job cuts coming = more bad news for housing = more bad news for tax collections at all levels = oh hell... one big fucking mess.

PRINT BEN, PRINT!!! Nominal dollars to zero purchasing power... Got PMs?

Hugh_Jorgan's picture

~~"The growth doesn't even match inflation @ 2.96%"

Worse, our 3% inflation number doesn't count luxury items. What are these luxury items? Oh, only really unnecessary items like food and fuel. The depth and breadth of current establishment deception never ceases to amaze me.


But, I'm crazy for stocking some extra food and having a firearm to protect it...

Kali's picture

But, I'm crazy for stocking some extra food and having a firearm to protect it...


No, not crazy, but according to the .gov, you are a terrorist.

_ConanTheLibertarian_'s picture

2008 low (666) will probably be taken out next week. Nice.

ucsbcanuck's picture

"Instead, he said he was surprised by how long the Baltic Dry took to fall. The NewContex index – an indicator of prices for transporting products in container ships – started falling in April last year.

Bullman said: “When we saw that happening in April, we realised that risks had returned to pre-2008 levels. We thought the Baltic Dry would start falling too, but it was actually relatively resilient.”

“What this is signalling is that the world economy is slowing down much more quickly than people have been thinking.”

Wow - and how is this good for the economy again?

HD's picture

Actually, I think that's their plan for poor people...

LetThemEatRand's picture

That, and Soylent Green.  Only it will be called Soylent Mac with Cheese.

Ancona's picture

No problem here! I already have a good campsite picked out and my blue tarp for a tent. I will simply camp out behind the Safeway store so I have first dibs on all the yummy delicious food they throw away!

I love it when a plan comes together.

Randall Cabot's picture

It's going to be gettng crowded back there.

ucsbcanuck's picture

You mean Soylent Mac with bacon and cheese?

VanillAnalyst's picture

Why pick up the selling expense?

Insure em, route them around the Italian coast, buzz the tower, and presto, money money money.

Short insurance.

cdude's picture

"stick the inventory on the ships, put them out to sea and count them as sold."


Great idea! Will help boost the BDI as well, which has fallen off a cliff over the past 2 months. 

No need to bother with automobile inventory because it's already counted as sold once it reaches the dealers.


Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: "There are three kinds of lies: lies, damned lies and statistics."
Mark Twain'

Steverino's picture

Bernanke's "Oh Shit" moment..

DavidC's picture

Or maybe he was aware of it the other day when he said he would keep ZIRP for an extra year...

But, yes, you're right.


LawsofPhysics's picture

Precisely.  Interesting how GDP was booming during that inflationary period back in the 70's < snark >

There is a very real cost for creating capital without added any real value, Same as it ever was.

tabasco71's picture

Glad to note your comment re creating capital without adding any real value... I believe this is a contributing factor to the EZ's debt issues which is only catching up with them now... apparently Spain and Greece (and probably the rest of EZ) did not adjust for PPP before changing into the Eur€ - they just changed the signs and banked the overnight increase in sales profits.  However in the intervening years, they have not invested and now have this additional pressure upon them.

francis_sawyer's picture

Presently, I'm "stockpiling" ammo... My personal GDP is therefore booming...

fonzannoon's picture

David C you are spot on. Anyone who thinks Bernak did not know this number was not coming is insane. Anyone who was surprised by his "bleak economic assessment in the face of improving data" needs mental help. He knew. Now everyone will say how smart he is for his outlook and give it more credibility. It would be funny if it did not make you nuts.

WonderDawg's picture

Makes you wonder what the real GDP will be after the revisions. Funny how GDP is always revised downward, after the fact, while the initial claims data is always adjusted upwards, after the fact. But surely there is no manipulation going on.

Hugh_Jorgan's picture

The problem with that is the massive inflation that we have only gotten a small taste of.

Ask your wife how much have the staple items in the grociery store risen in the past 2 years. Have they risen by the 2x3% that we have been told the have? Hell, no. Some item are up 30%, 50%, or even 100% like gasoline. The ZIRP effect is not a linear function. Continued input into the system has a lagging but multiplicative effect. Prices are about to "necessarily skyrocket", we had all better be preparing for a BIG storm ahead.

Hugh_Jorgan's picture

Yes, it does appear the flux strength of the feces that is colliding with the occillating air turbulence inducer is indeed rising in intensity, doesn't it?

Dr. Engali's picture

Gas was 3.15 yesterday morning when I pulled into work. When I went to lunch it was 3.49.

SheepDog-One's picture

Nice .45 cent overnite swing in gas prices here too....this is all fucked.

kridkrid's picture

How does someone down-vote that post?  Weird.

Dr. Engali's picture

I think Sheep dog has a  stalker that just votes down any post.

kridkrid's picture

A badge of honor.  I want one of those.

Sockeye's picture

Ask and you shall receive!

kridkrid's picture

I would like to win some state sponsored lotter (i.e. tax on dumb people who don't understand math), take the lump sum payout and convert it into farmland.

francis_sawyer's picture

they'd just raise the taxes on your farm until you couldn't pay it anymore... Then confiscate the farm...

You're back to square one...

kridkrid's picture

Ha!  thanks for your support.

ucsbcanuck's picture

Can't afford to have pesky negative facts getting in the way of regular hopium high...

Non Passaran's picture

Because the math is wrong?

Cunning Lingers's picture

They raise prices for absolute necessities and devalue the dollar to reduce purchasing power.

Double whammy.


Food and fuel are not components of the Core Inflation Index so they pump up these prices and have the cheek to announce there is no inflation.


kridkrid's picture

One needs to look no further than your statement to understand just how absurd our reality is.  Food and fuel are not components of the Core Inflation Index.  Of course it's explained away in very rational sounding explanations... I like the word rationalize... rational sounding LIES. 

This is just the start... and we are still a long ways to go before people take to the streets.  The % of our incomes that go towards food is still relatively low... that will change.  And it doesn't really matter if they choose deflationary collapse or a hyper-inflationary "collapse"... The cost of our food as a % of our income is going to climb.


Dr. Engali's picture

You are right. When food becomes 80% of their income 70 to 80% of their income, then things will get ugly.

kridkrid's picture

It's not even that high.  Everyone wants to come up with reasons for the Arab Spring, and to be sure, I'm one who likes to entertain good conspiracy theories.  And while I'm sure their are masters pulling strings somewhere in the mix, the rise in food prices relative to incomes is what really drove discontent.  Get ready... because it's coming.

Are you kidding's picture

Won't they just add more people to SNAP?

scatterbrains's picture

only those that vote the right way