Here’s the WSJ lede on GDP:
"The U.S. economy soared last summer, growing at a
rate much stronger than earlier estimated, but the earnings of
companies were flat, the government reported Thursday.
Gross domestic product rose at a 4.9% annual rate July
through September, the fastest quarterly pace since 7.5% in
third-quarter 2003, the Commerce Department said.
The new, 4.9% estimate for third-quarter 2007 GDP
reflected a revision up from a previously reported 3.9% increase.
Higher inventories and exports were behind the government’s revision to
GDP, a measure of all goods and services produced in the economy."
"The world’s largest economy grew at an annual rate of 4.9
percent, the most in four years, according to revised data today
from the Commerce Department in Washington. The pace is a
percentage point stronger than estimated last month and follows
a 3.8 percent rate in the second quarter." (emphasis added)
This 4.9% number is one of the more "fanciful" government releases you will see in your lifetime, (outside of the state run media that exist only within totalitarian dictatorships).
Did this past quarter feel like the strongest growth quarter in 4 years?
Let’s begin with what we know about Q3 prices: They saw significant increases — yet the price index deflator was a 9 year record low of 0.9%. Rex Nutting observed: "Because of the way in the price index is constructed, it likely understates
real-world inflation, and thus overstates real growth."
Residential fixed investment, the GDP component that includes spending on housing, plunged by 19.7% in the third quarter (but Investments in structures increased 14.3%).
Profits for the 3rd quarter flipped negative, dropping 8.5%.
We have seen consumer spending falter, with the crucial opening salvo of the holiday weekend down 3.5%. That’s no surprise, given that second-quarter wages were revised lower by $44.8
billion. As a result, real disposable incomes fell 0.8% in the second
quarter, instead of rising 0.6% as the Commerce Department had previously
Question: How can Q3 GDP be 4.9% with corporate earnings, housing and retail sales so awful? Forget Goldilocks, this fairy tale sounds more like Cinderella . . .
Chart courtesy of Barron’s
GROSS DOMESTIC PRODUCT: THIRD QUARTER 2007 (PRELIMINARY)
CORPORATE PROFITS: THIRD QUARTER 2007
U.S. Department of Commerce, November 29, 2007 8:30 a.m.
Economy Grew 4.9% in 3rd Quarter, Up From Previous Estimate of 3.9%
WSJ, November 29, 2007 9:38 a.m.
U.S. Economy Expanded at 4.9% Rate in Third Quarter
Bloomberg, Nov. 29 2007
U.S. GDP revised up to 4.9% for third quarter
Corporate profits fall even excluding subprime write-downs
MarketWatch, 9:14 AM ET Nov 29, 2007