We’ve all seen the headlines by now. It’s interesting how the LSM is playing this, even Fox.
Still, the weakness may be because of one-time factors. Government spending cuts and slower inventory growth subtracted a total of 2.6 percentage points from growth.
It’s “the best-looking contraction in U.S. GDP you’ll ever see,” Paul Ashworth, chief U.S. economist for Capital Economics said in a research note. “The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging.”
The weakness may be because of one-time factors, though. Government spending cuts and slower inventory growth subtracted a total of 2.6 percentage points from growth. Both are volatile. And they offset faster growth in consumer spending, business investment and housing.
And on it goes with every major news source I could find. So, what’s the problem with this explanation? Is the defense spending cuts a one-time event? Maybe. But, what does slower inventory growth indicate? Businesses reduce inventory because of reduced demand. It isn’t a one-time thing, it is an harbinger of things to come. I’ll show you what else is an harbinger…….
There’s only been one time in recent past that the 1st of the year quarter outperformed the preceding last of the year quarter. Sort of, the 5.3% contraction was still a contraction compared to the previous quarter but I don’t want to get bogged down in discussing less negative growth.
Will we double dip? Probably, I’m not sure. I’m even less sure of this metric (GDP) holding much value considering all of the QE we’re doing. This is an amazing feat considering the Fed is pumping $100 billion into the economy every month!
We should also note, this occurred before every American saw an increase in taxes and less take-home pay. “Best-looking contraction in U.S. GDP you’ll ever see“? I see no reason for the Pollyanna outlook. OTOH, if the powers that be understood the perils we’re in, I’m very certain they would react improperly, so maybe this works to our benefit that they don’t recognize what’s coming.
I don’t know when, no one really does, but we are certainly headed for another recession and it will probably be worse than the one we just experienced/are experiencing. It could be that our economy will sputter along like it has for the last several quarters, each quarter making the future recession/depression worse.
The problem is, we haven’t done the necessary things to soften the next blow. We have done absolutely nothing different in the recent years to prevent what happened in 08-09. In fact, we’ve done more of the things which created the weaknesses, with the possible exception of lending obscene amounts of money to people with poor credit for home buying, but that could change soon. And, besides, we’ve found other avenues to indebt the people.
Things aren’t getting better under this leadership, things will not get better under this leadership. The sooner the public realizes this, the sooner we can move to a real recovery.