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Just How Distorted are Those GDP Economic Numbers?

Economics / Economic Statistics May 10, 2014 - 06:24 PM GMT

By: Raul_I_Meijer

Economics

I want to share two graphs that Tyler Durden posted yesterday and let you make up your own mind as to what they mean. We’ve all been able to see how US Q1′s official GDP growth was revised to 0.1%, after which Goldman Sachs and JPMorgan said they put the number at -0.6% and -0.8%, respectively. But Goldman, not to be outdone by itself, or that’s the impression, then comes out with a new prediction for Q2, for a rise of no less than 3.9%, or 4.5 % above their own Q1 number. Durden caught that one too:


Humiliated On Its Q1 GDP Prediction, Goldman Doubles Down, Boosts Q2 Forecast To 3.9%

Goldman, it would appear, are desperate to not be forced to admit they are wrong once again. On the heels of their dramatic and humiliating swing from expectations of a +3.0% Q1 GDP growth rate at the start of the year to a current -0.6% expectation, the hockey-stick-believers are out with their latest piece of guesswork explaining how growth will explode to 3.9% in Q2 (a full percentage point higher than their previous estimate).The platform for this v-shaped recovery – “consumer spending will probably grow strongly, while the housing market should gradually improve.” So ‘probably’ and ‘should’ it is then.

By now, and I guess we’re all supposed to blame the weather one last time for the difference between reality and prediction (or hopium, if you prefer), the consensus among experts, analysts and mere talking heads in the industry calls for a 3.3% Q2 GDP growth number, which is evidently still not enough for Goldman, even though they were off by 3.6% between their initial prediction and their eventual assessment of Q1.

What’s good to note in this next graph is that GDP looks sort of fine until January 1 at 2.5%, and only then started falling. But the winter weather that gets the blame for everything didn’t only start on January 1, did it? It looks more like an entire recalibration of sorts.

The Miracle Of Modern-Day Keynesian Dreams

With various extremely well paid sell-side economist slashing Q1 expectations for growth even further, we though it would be worth a glance at the ever-rising estimates for Q2 (that Goldman started this morning). Consensus for Q2 has now spiked to +3.3% (its highest since tracking began) as the Keynesian hockey-stick-believers have gone full bounce-tard now… Well they did nail Q1!!

And it’s useful also to look at how global GDP numbers are being revised downwards all the time, though they seem to have a hit a bump up just when the snow hit the US. There’s a little video at the link that I took out, but which you can find if you scroll down, of Saxo’s Steen Jakobsen talking about the hurting economies of China and Europe.

Saxobank Warns China Is Exporting Deflation

With global growth expectations for 2014 having just collapsed to new lows … and on the heels of mixed inflation data last night in China (and stubbornly low-flation in Europe), Saxobank’s Steen Jakobsen [..] argues that both the Eurozone and China are at the centre of a slowing world economy which will see stagnation for the immediate future and ECB action, or lack of it, can’t do a thing to change the status quo.

The question becomes: how realistic is it to presume that the US consumer will go on the mother if all shopping sprees in this climate (pun very much intended)? We know housing won’t be a part of that spree, new home sales and mortgage applications won’t allow it. So you tell me what could make it happen. What are they going to be buying? More Obamacare? I don’t see where that kind of growth would come from, Durden doesn’t, and neither does Steen Jakobsen. You?

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2014 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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