Some interesting snippets on matters of the economy at the end of the week.
Reuters lets us know that the economy in the fourth quarter of last year grew a tad stronger than was initially thought.
(Reuters) – The U.S. economy grew more quickly than previously thought in the fourth quarter…
Gross domestic product rose at an annualized rate of 3.1 percent, the Commerce Department said in its final estimate, revised up from 2.8 percent.
Several thoughts on this, first of all, even though 3.1% growth isn’t particularly anything to write home about, it’s better than 2.8% so you’d think that the Administration would be crowing about it. After all, it’s moving in the right direction. So why’d they release the news on Friday? Maybe it could be the rest of the information in the article, ya think? What could be wrong? Well…
…first-quarter GDP is shaping up to be on the soft side,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.
According to Sweet, data so far suggests growth in the first three months of 2011 was between 2.5 percent and 3 percent.
Oh, first quarter will likely be less than the fourth. Oh. And what, pray tell, could be the reason for the “pull back”?
Rising fuel prices, boosted by unrest in the Middle East and North Africa, are largely blamed for the expected pullback in growth, although economists expect it will be temporary.
Temporary? Did I sleep through the headlines that the Obama Administration has lifted the “moratorium” on drilling for oil? Or that they are doing something that is going to ease the unrest in the ME? I didn’t think so and apparently neither does the Pentagon since they have no clue when we’ll be out of Libya. What sort of assumptions are required to reach this sort of a conclusion?
“Assuming that oil prices stabilize and fall a little and that Japanese reconstruction and recovery will begin in the next few months, this softness in growth is likely to be short-lived,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.
Got that? Oil prices fall, no impact from Japan. I’ve learned something through this exercise. Economists are no smarter nor are they any more honest than realtors. You know, those guys who were telling us in 2005 that there was no housing bubble. OK, so the bottom line for this part of the exercise is that economic growth will be falling in the first quarter and even that guess requires assumptions that are off the chart stupid. And then there’s this…
Several Fed officials on Friday described the economy as being on a firmer footing and said the U.S. central bank was unlikely to extend its $600 billion government bond buying program when it ends on June.
Let’s remember that the Fed has been printing $$ like crazy and buying T-Bills in order to hold down the yields. Holding down the yield keeps the interest rates lower and has a direct impact on the cost of interest in the budget. If the Fed stops buying there is every probability that the auctions will fall short and the fit will hit the shan. If the auctions start falling short a bunch of bad things happen: the debt limit votes won’t matter because if we don’t sell the Ts there’s no debt to worry about. Oh, and there’s no money to spend, which will take care of the debate about that $100B reduction in the budget and then some. And then, in order to not run out of money, yields will go up. So will rates. So will the cost of our debt. You get the idea.
Now then, just to restore your faith in mankind, Reuters has another article on a tangential subject. Consumer confidence. Now, before reading the following paragraph go back and take a quick glance at the National Association of Realtors economists said about the coming turnaround. OK, now then, let’s see what we common folk are thinking.
(Reuters) – Consumer sentiment in March fell to its lowest level in more than a year as gasoline and food prices rose, a survey released on Friday showed.
There’s more drivel in the article related to interpretation of the data by “professionals”. I’ll leave you to read that at the link and draw your own conclusions.My conclusions, FWIW, are that we are headed for deep do-do in the second half of the year. Very deep. In addition to food prices and fuel prices, the housing sector will be continuing deeper into the tank. I think things are going to get really ugly, not just in the economy on the street, but in the halls of Congress and State Legislatures. The snow ball has started and it’s getting bigger. And will be soon rolling much faster.