Revisiting Q1 GDP Revisions

The consensus in the media is that revisions higher in GDP to 0.9% means that the US has successfully avoided a recession.

I highly doubt that is the case.

The good news is that, and once again, I can comfortably slip into a (rather than mainstream) contrarian recession call. I was uncomfortable when the masses were ever so briefly agreeing with me anyway.

Why do I disagree? As the chart below shows, the revised GDP gains were 1) National Defense spending by Uncle Sam; 2) Inventory builds; and 3) net exports. That leaves the majority of the economy — call it "private domestic demand" — in contraction mode, with an annual rate of -0.4% (vs. -0.7% in advance GDP). Domestic Consumption,  Fixed Investment,  Exports, and State & Local governments all showed quarter over quarter losses. 

Its important to understand the significance of this factor. In the post WW2 era, this is a relatively rare occurrence. Merrill’s David Rosenberg points out that "Over the past five decades, such weakness in private domestic demand occurred barely more than 10% of the time." You can bet those times were not brisk expansions. 


click for embarrassingly large charts



charts by Jake


Plenty of folks seem to think we have wished our way out of a
recession. They need to spend some more time with the actual data.

Category: Data Analysis, Economy

April New Home Sales – Revisited

Category: Data Analysis, Real Estate

NYMEX Raises Margin Requirements for Crude

Category: Commodities, Energy, Trading

KB Homes: U.S. Home Prices Will Drop 10% More

Eli Broad, founder of homebuilder KB Home

click for video




U.S. home prices likely will drop another 10 percent from their peak before the housing market begins to recover, said Eli Broad, founder of Los Angeles-based homebuilder KB Home. "Every housing market’s different, but you can expect housing prices to continue to decline in most markets for the next year or so,” Broad said in an interview from Los Angeles with Bloomberg Television.

Sales of previously owned homes in the U.S. fell 1 percent last month and the supply of unsold properties reached a record, the National Association of Realtors said last week, signaling a continuation of the 27-month housing slump. The median price of an existing home fell to $202,300 from $219,900 in April 2007. "I think we’ve got probably another 10 percent to go” from the price peak reached in 2006, Broad said today.

Broad said the U.S. economy is "in a recession no matter how you want to measure it,” and recommended that investors put their money in the energy industry, multinational companies with the largest stock-market capitalizations, and emerging economies such as Brazil, Russia, India and China. The return on U.S. stocks likely will "be in low single digits” this year, he said.

KB Home Founder Broad Says U.S. Home Prices Will Drop 10% More
Matt Miller and Daniel Taub
Bloomberg, May 28  2008

Category: Real Estate, Video

Dallas Fed: Oil Heading Back Under Par

Category: Commodities, Data Analysis, Energy

Q1 2008 GDP (Preliminary Revised)

Category: Data Analysis, Economy

The Fall of Bear Stearns

Category: Corporate Management, Credit, Derivatives, Financial Press, Trading

Oil Exporters Are Unable To Keep Up With Demand

Category: Commodities, Energy, Markets

The Costanza Energy Policy: 25 Ways to Drive Oil to $150

Category: Energy, Politics, Taxes and Policy

Blecch: Spam Prices Rising

Category: Inflation