GDP Ex Housing

Despite the weather improving in March, pending sales of
existing homes
decreased at a seasonally adjusted annual rate of 4.9%; Sales were
down 10.5% from one year ago. Economists were looking for a 0.4% increase.

While some people ignorantly insist Housing is having zero impact on the economy, I am heartened to see the business press isn’t buying into that nonsense. Bloomberg’s Caroline Baum not only punctures that absurdity, but assigns a political explanation for it as well:

"Excluding housing, the U.S. economy is doing just fine.

That’s the latest rationalization of a select group of operators who think that the Bush administration’s 4.6 percentage point cut in the top marginal tax rate and 5-point reduction in the top capital gains rate can protect the economy from any and all ills.

To say that ex-housing the economy is doing just fine is tantamount to claiming that, ex-Iraq, Bush’s Middle-East policy is a rousing success."

Caroline pulls no punches. I am partial to analogy used by Deutche  Bank’s Joe Lavorgna. We’ve been discussing how utterly untethered from reality that analytical approach is, and Joe observed:

"Backing out Housing today is like going ex-Capex in the late 1990s. Corporate Capital Spending was huge in the the nineties, and if we remove its contribution from GDP from 2000 forward, well, then there was no recession in 2001-02."

Let’s do a quick review of our favorite Ex’s:

• Back the things going up in price, there’s no inflation (Inflation ex inflation)
• Remove Housing from GP, there’s no economic deceleration (GDP ex Housing)
• Elimate the CapEx spending from the tech boom, and therewas no 2001 recession (GDP ex Capex)

Did I forget any? Feel free to use comments to suggest other analytical absurdities . . . 


Housing? What Housing? I Don’t See Any Housing
Caroline Baum
Bloomberg, April 30, 2007

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What's been said:

Discussions found on the web:
  1. Steve commented on May 1

    Did I forget any? Feel free to use comments to suggest other analytical absurdities . . .

    GDP ex MEW.

  2. Royce commented on May 1

    My net worth is doing terrific if you strip out spending.

  3. Rusty commented on May 1

    How about employment ex-discouraged workers?

  4. winjr commented on May 1

    “My net worth is doing terrific if you strip out spending.”


  5. cariboo_kid commented on May 1

    my account is doing great today ex my dow jones short

  6. Donaldo Rodrigues commented on May 1

    If you take out all the days the Dow has been down since the last recession, it’d be up to 30,000 today!!

    So, we have Dow-ex-down-days!!

  7. darius commented on May 1

    This is brilliant! Remove my mortgage payment = very small overhead :) Now what can I spend that new extra cash on?

  8. Idaho_Spud commented on May 1

    Batting average, ex strikeouts? No, that would be considered corrupt, wouldn’t it?

  9. Kevin Rooney commented on May 1

    2000 presidential election ex. Florida

  10. anon commented on May 1

    I’m a real Cassanova ex. my lack of dates.

  11. darius commented on May 1

    A bit out of topic. Just got off the IM with one of the local (Chicago) Real Estate offices I provide web service for. They are closing two out of three offices. About half a dozen emps let go. Things are getting just way too slow for them. Good thing (for me) they just paid for the next quarter of my services.

  12. gn commented on May 1

    National Debt ex Future Entitlements

  13. REW commented on May 1

    Not counting my voice, I am the next American Idol.

    Ignoring the actual words in the Fed Minutes, the Fed is sure to cut.

  14. M.Z. Forrest commented on May 1

    I don’t really have problem with wondering about GDP ex-housing. The bigger issue is what insight one would hope to gain by removing it. Are folks trying to argue that housing is disguising the actual major trend in GDP? At least with GDP ex-Capex, you could learn that Capex was the major trend. Or course such analysis is dependent upon people not just data mining.

    In that context, GDP ex-housing is just infoporn, data without context.

  15. M.Z. Forrest commented on May 1

    My favority measure:
    Marital bliss ex wife.

  16. mhm commented on May 1

    “Ignoring the actual words in the Fed Minutes, the Fed is sure to cut.”

    Actually they are cutting by proxy… all other central banks are raising rates which leads to the same macroeconomic effects. IMHO.

  17. fred c. dobbs commented on May 1

    Excluding items is a great idea when you want to analyze the parts that make up a whole. S&P profits ex-energy and ex-financials gives us a whole new way of looking at things.
    The problem comes when you strip out something that’s important and say that’s all that matters.
    Core CPI is a good example. It’s fine analyze inflation to see where the pressure is. But it’s not OK to say that a tame core number means there’s no inflation.
    My favorite “ex-” example: The Big Picture ex-all-the-rants-about-ex is the best blog in the world.

  18. Robert Cote commented on May 1

    Since the Lincoln joke is taken…

    The economy ex-economy is doing fine which stands in contrast with inflation ex-inflation which is low. The best of both worlds from the ex-reality perspective.

  19. Idaho_Spud commented on May 1

    Big Picture ex-dobbs posts the best blog ever.

  20. Idaho_Spud commented on May 1

    Ex-iceberg, the Titanic’s maiden voyage was uneventful.

  21. REW commented on May 1

    I think you are half correct. The Fed is cutting by proxy. By that I mean their rate hikes of 2004-2006 did not reduce liquidity. Total Reserve Credit expanded for most of that period. Gold has obviously soared, and all other commodities have followed. Such is the folly of trying to control inflation by manipulating the FFR target.

    Sorry, but I don’t see it as a cut when other CBs are raising and the Fed is standing pat. What if the Fed did actually cut while other CBs raised rates? What is the difference?

  22. John commented on May 1

    Dang, Spud got to it first.

  23. grodge commented on May 1

    Bears-Colts Super Bowl, ex-Grossman’s interceptions.

    Da Bears are the Champs. Take THAT, Peyton Manning!

  24. S commented on May 1

    My pet peeve is earnings ex stock option expense. They argured for years about whether options should be expensed or not. Now that its required to be reported as an expense and run through the income statement, everyone ignores.

  25. mhm commented on May 1

    REW, “What if the Fed did actually cut while other CBs raised rates? What is the difference?”

    The dollar devaluation is bad as it is (by proxy). If the Fed announces a rate cut it would be worse.

  26. KP commented on May 1

    I just keep waiting for the next illogical step, when folks start reporting numbers ex-expenses and in-ifs.

    If you’re going to report fantasy, why do it half-assed?

  27. John commented on May 1

    Travel time, ex traffic and weather.

  28. Guenter commented on May 1

    Climate change ex global warming

    it’s just normal that we have 28deg celsius in mid april in paris …..

  29. Guenter commented on May 1

    Climate change ex global warming

    it’s just normal that we have 28deg celsius in mid april in paris …..

  30. MAS (San Diego) commented on May 1

    Props to Joe Lavorgna for his scrapping with Don Luskin yesterday on Kudlow. Joe sunk his teeth into Luskin’s ankle and didn’t let go.

  31. Mike Cloud commented on May 1

    Back the science out of global warming and it’s just a political maneuver.

    Taking politics out of the U.S. Attorneys job is just so unfair.

    Back the voting out of the vote and …

  32. Nova Law commented on May 1

    Gross domestic product ex-mortgage equity withdrawal?

    Wait a minute, somebody beat me to that analytical absurdity… ;-)

  33. Winston Munn commented on May 1

    GDP ex-consumer spending – oops!

    From Nouriel Roubini’s blog:
    “There is now first evidence that consumption has started to weaken in April. According to Redbook Research’s latest indicator of national retail sales released Tuesday U.S. chain store sales fell 4.1% – on a seasonally undajusted basis – in the first three weeks of April compared with the previous month. Also, on a year over year % basis this is the first such drop since March 2003…”

  34. Mark commented on May 11

    Inflation Ex Food and Energy Cost Increases

  35. Andrew Shuen commented on May 12

    Reliable data ex lies, damned lies and statistics

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