The latest estimate of economic growth for the final quarter of 2012 published by Uncle Sam's Bureau of Economic Analysis on Thursday told us that the economy grew at an annualized rate of 0.4%. Not annualized, that means it actually grew by 0.1%. A $100,000-a-year business doing that "well" during a quarter would have seen its sales increase by $25 (.001 times $100,000 divided by 4).
CNNMoney.com was so happy with that revised result that it presented the following headline and graphic to its readers:
Chris Isidore's actual story was almost as weak (bolds and numbered tags are mine):
... businesses fearing the fiscal cliff cut back in the fourth quarter, trimming inventories of goods on hand. [1] And the government slashed spending on defense.
Together those two factors eliminated nearly 3 percentage points of growth from GDP, and those readings didn't change in the latest report.
But the worst economic hit of the fiscal cliff was avoided. And growth appears to be fairly solid so far this year -- thanks to a strong housing recovery [2], improved hiring by businesses [3], and a pickup in car sales [4] and consumer spending.
Economists are generally forecasting much stronger growth in the first quarter of 2013. The consensus of experts surveyed by the National Association of Business Economics is for first quarter growth of 2%, while Goldman Sachs recently raised its first quarter forecast to 2.9% growth. [5]
Notes:
[1] -- Uh, no. Business cut their inventories on concerns that customers aren't spending. Personal consumption expenditures only increased by an annualized 1.8% (or an actual 0.45%) duirng the quarter.
[2] -- Two charts at Zero Hedge will show readers how "strong" the housing recovery is in context. It's recovering, but certainly not "strongly." What we really have is an industry (even after taking out the bubble-induced elements from the middle of the last decade) which contracted by about 70& and has clawed back perhaps one-fourth of what was lost that is operating barely above levels last seen in the early 1980s Carter-caused malaise.
[3] -- Private-sector employment on a not seasonally adjusted basis shrank by 1.638 million jobs from November 2012 through February 2013. Such shrinkage occurs annually during that four-month period, but, as seen here, the 2012-2013 result (pending revisions) is over 100,000 jobs worse than the 1.521 million reduction in employment from November 2011 through February 2012. This is not "improved hiring" -- even before considering the growing part-time compnent of the workforce.
[4] -- February 2013 sales were 3.7% greater than February 2012. Somehow, this was seen as impressive. I don't see how.
[5] -- So let's say that Goldman Sachs is right, and first-quarter 2013 GDP growth is an annualized 2.9% -- at which point the press will probably start describing the economy as "soaring." If that's so, the first quarter will only have reversed the three points of excuses the press (including Isidore, in unexcerpted content) has been making for last year's fourth quarter, and average growth during the two quarters will be a annualized 1.65%. Big deal -- not.
The better description of the economy is that it's on its elbows and knees, trying to figure out if it has enough strength and willpower to get up.
Cross-posted at BizzyBlog.com.
