Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.2 percent in the third quarter of
2009, (that is, from the second quarter to the third quarter), according to the “third” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 0.7 percent.
Notice a few things here. “Goods and Services produced by labor and property“? Uh, property produces things? Me thinks not. But we’ll leave that alone for a minute…..
2.2% eh? I thought it was 2.8%? Or was it 3.5%?
Looks like close to 40% of the so-called “growth” disappeared!
Let us not forget that on the day the original “release” was made the market was up by 20ish SPX points, or about 2%. Today, we discover that the “second revision” cuts 40% off the so-called “growth” and the market yawns.
But let us look inside, shall we?
Motor vehicle output added 1.45 percentage points to the third-quarter change in real GDP..
Cash for clunkers, remember? What did they say back in October?
Motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP
Well some of the change was there… where’s most of the rest?
Real federal government consumption expenditures and gross investment increased 8.0 percent in the third quarter
Heh, that’s up a bit from the first look, yes?
Real federal government consumption expenditures and gross investment increased 7.9 percent in the third quarter..
So where’s the change? Mostly inventories – remember the much-vaunted inventory build? Well….
The change in real private inventories added 0.69 percentage point to the third-quarter change in real GDP
So they say now. Then?
The change in real private inventories added 0.94 percentage point to the third-quarter change in real GDP
Well there’s part of it.
Real residential fixed investment increased 18.9 percent
It is, eh? What did you say two months ago?
the “big change” in private domestic investment is all residential fixed – up 23.4%.
Uh….. that’s not a small change folks – off by 20%? Hmmm….
Reality is that if you wanted to pump the market there would be few better ways than to “accidentally” make initial reports “better”, then revise it away later when “higher quality” numbers show up.
The ugly reality, however, is that with the government being 30% of the economy and up 8%, the government’s “pump” was responsible for 2.4% GDP “growth” – or more than the entire claimed increase.
That is, with this revision we now have proof that we’re exactly where I said we were in October: The economy is not expanding at all in the private sector, rather, other than explicitly government spending, even with so-called “rebates” and “special deals” – IT IS STILL CONTRACTING!
The funny part is that if you read inside the preliminary release you’ll find the confidence levels – that is, the revision boundaries. One wonders – are these really “revisions to data” (when they hit the boundary exactly) or does the Goebbels Ministry of Truth live on, and they simply didn’t want the facts – as I believed to be the case in October – to be revealed?
Will market participants figure this out? Probably not right away. But you can bet on one thing with certainty: Cash flow always wins in the end, irrespective of whatever false light government (and their handmaidens in the media) would prefer to present to you.