We probably can't get more relevant commentary on today's absolutely massive downward GDP revision than that penned today by Goldman Sachs' Edward F. McKelvey:
This was a much larger than normal revision for the third pass on a given quarter, knocking what once was a fairly robust 3.5% bounce down to a mediocre 2.2% (from 2.8% prior to this revision). All sectors except the trade balance -- a focal point of last month's downgrade -- saw some downward revision. Revisions were particularly deep in business investment -- to -5.9% from -4.1%, worth two tenths of the revision -- and in inventories (also worth nearly two tenths).
That would be those sectors that should, one would think, be among the easiest to count in the first place, especially on the second try.
Goldman is being very kind here. Goldman started off the day with this from GS Breakfast Bytes:
GDP for Q3 (third estimate)... not much change, though risks lie to the downside. GS: +2.8%; median forecast (of 73): +2.8%, ranging from +2.5% to +3.7%; last (Q3 second estimate) +2.8%. The third cut on a given quarter does not usually produce much of a change in the growth estimate. In this case, the risks against our assumption of no change lie to the downside, reflecting large downward revisions to construction spending for August and September. Like many others, we do not see a meaningful probability of changes in the +0.5% estimate for the GDP price index or the +1.3% figure for the core PCE price index. (Emphasis ours).
It is difficult to get a more direct sense for how much mind share government bailouts (and government figures) have managed to command. That even the most pessimistic member of the "consensus" (n=73) managed to overshoot the mark by nearly 14% and the average sailed full speed into a 27% pop-up should remind us of three things:
- The Bureau of Economic Analysis of the United States Department of Commerce has ceased to be (if it ever was) a reliable outlet for economic data. (Be this the result of misfeasance or malfeasance depends on the reader's propensity to credit conspiracy theory).
- That what passes for the professional prognosticator class these days is pathologically incapable of realistic appraisal.
- That the largest single expression of a Keynesian "injection" in the history of Keynesians or injections (or the planet) struggled to create even the most anemic growth. Net the double counting of stimulus funds it seems difficult to imagine even a remotely encouraging (or positive) "growth" figure could be tortured out of the economic realities that would be so plain if one but looked out the window to forecast them.
If it isn't clear to everyone by this time that the United States remains firmly in the grips of a massive "shadow recession," then we can only credit this ignorance with some unshakable and deeply rooted form of denial or a seriously reckless case of willful blindness. Either way, we would like to commend the current powers that be for their tour de force performance in establishing themselves firmly both as the most masterful of bullshit artists to occupy the beltway (and that's saying something) and simply the most economically inept (and expensive) team ever to hold national office. The risk adjusted returns on this particular ruling clique would make the pre-dollarization Zimbabwe carry trade look attractive.
If there is a silver lining to be found here it is probably that this little experiment might finally drive a splintered wooden stake through the heart of John Maynard Keynes' ghost (or at least irradiate Paul Krugman's ravings to within 50 rads of his professional life).