Tuesday, December 22, 2009

GDP Numbers: Good News or Bad News?

This is the tale of two headlines. They both concern the latest revised figures for the GDP, but the nuance is in the headlines.

BBC states it as US Growth Rate Revised Downwards
The latest estimate said the economy grew at an annual pace of 2.2%, down from the previous estimate of 2.8%. The first reading had shown growth of 3.5%.
Reuters paints a rosier picture with this headline. Economy Expands 2.2 Percent In Third Quarter
It was still the fastest pace since the third quarter of 2007 and ended four straight quarters of decline in output. The resumption of growth in the July-September period probably ended the most brutal recession since the 1930s.
The good news is that any growth in the GDP is a good thing, but there is far more bad news in the release of these figures then good news, and all indications point to a rough road ahead.

Non residential building construction dropped by 14.8%, imports jumped by 21.3%, business inventories fell by $139.2 billion, business investment fell at a 5.9% rate and continued layoffs.

While those are the figures for the 3rd quarter, the Federal Reserve is predicting that the 4th quarter will continue with a growing GDP, and they may be right, although it has been so long since any of the experts have been right that I am skeptical.

The critical period for me and the time frame I am keeping an eye on is the 1st quarter of 2010, starting in January. There is a lot economic fatigue in the country right now, and a lot of companies have simply grown tired of laying people off and were hoping that there would be something at the end of the year to give them some sort of hope.

Instead all they have received is more bad news of further expansion of federal control over their business sectors, increased regulations, and huge looming mandates for yet more confiscation of their money by the federal government.

Recent EPA proclamations coupled with the steamrolling of the business community and individuals by the Democrats contained in the healthcare bill and a general tightening of the pocketbooks by the average American consumer just doesn't give most businesses anything to be hopeful for.

If the healthcare bill sees the light of day, a lot of construction projects already in the pipeline funded by the states will be cut so that states can meet the Medicaid mandates that will be forced upon them. I am sure a lot of other contracts at the state and local level will have to be canceled to meet these new demands on states budgets.

Of course Nebraska has no problems, just the other 49 states.

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