Dismal Economic Numbers
This mornings roundup of economic numbers really show the level of economic pain that currently exists, yet, the market is taking it in stride at the moment on optimism that things surely must get better from here. Well, we can always hope.
GDP came in about in line with our expections from yesterday printing a 1.3 growth rate in the second quarter, our range was 1.25-1.5, with revisions to the data confirming the economy has been far weaker than eluded to by mainstream media commentators and economists. While growth in gross domestic product (GDP) —a measure of all goods and services produced within U.S. borders—rose at a 1.3 percent annual rate ub the 2nd quarter; 1st quarter output was sharply revised down to a 0.4 percent pace from 1.9 percent. Ouch.
Not surprising the majority of Economists had expected the economy to expand at a 1.8 percent rate in the second quarter and are obviously shocked at missing their numbers. Side note: I want a job where I can get paid six figures for being consistently wrong.
In addition, 4th quarter growth was revised down to a 2.3 percent pace from 3.1 percent which we have been discussing for some time now and shows that the economy was really not affected by the massive injections from the Fed and was deteriorating as consumers struggle to make ends meet and really had little to do with Japan - which certainly didn't help much.
"Economists had expected the economy would show signs of perking up by now with Japan supply constraints easing and gasoline prices off their high, but data has disappointed." Seriously, I have to get me one of those jobs!
Furthermore, as we discussed yesterday the government is revising the data all the way back to the beginning of the series and the sharp downward revisions to the prior quarters suggest a more troubling and fundamental slowdown might be underway. As we have been writing about in our weekly missives had it not been for the support from $5 Trillion of government intervention into the markets we would already be entrenched within a second recession. As it stands - we have only managed to temporarily postpone it - technically speaking of course.Data released on Friday showed the 2007-2009 recession was much more severe than prior measures had found, with economic output declining a cumulative of 5.1 percent instead of 4.1 percent. The annual revisions of U.S. GDP data from the Commerce Department showed the economy contracted at an annual average rate of 0.3 percent between 2007 and 2010. Output over that stretch had previously been estimated to have been flat. The economy needs to grow at a rate of 2.5 percent on a sustained basis just to remain at break even with the current employment situation...much less actually reduce it.
Consumer Spending Brakes Sharply
Consumer spending, which accounts for about 70 percent of U.S. economic activity, decelerated sharply to a 0.1 percent rate -- the weakest since the recession ended two years ago. Spending grew at a 2.1 percent pace in the first quarter.
U.S. consumer sentiment fell in July to its lowest point in more than two years, as anxieties over stagnant wages and rising unemployment deepened according the Thomson Reuters/University of Michigan's final reading. The overall index of consumer sentiment came in at 63.7, down from 71.5 in June, the lowest reading since March 2009. That is just below the preliminary July figure of 63.8 and the median forecast of 64.0 among economists polled by Reuters.
The survey's gauge of consumer expectations slipped to 56.0 well below June's 64.8 and these levels of the expectations index are consistent with recession. The survey's barometer of current economic conditions was 75.8 in July, down from 82.0 in June, and below a forecast of 76.3.
Just 1 in 10 consumers expected to earn more money in the year ahead and twice as many consumers reported hearing about new job losses compared with job gains in July.
QE 3 - How Long Now?All in all - the consumer is down and out for the count, at least for now, the economy is much weaker than we have been led to believe, unemployment is rising and wages are declining. It seems that it is only a matter of time now until we start getting the clarion call for more market support OR has Ben's helicopter run out of gas?