As much as I typically like to discuss NFP on the first Friday of each month, I find myself unable to muster the usual blather. Not because the initial data is near garbage, subject to massive revision, and wildly off from reality — that’s a given.
No, today I find myself unable to get enthused about NFP because I am still reeling from the horrific GDP data we got yesterday.
What’s that, you ask? In the media, GDP was reported at 0.6% you say? Um, no — that’s the annualized rate — take Q1 GDP and go mulitple it 4X and THAT’s how you get to a still pitiful 0.6%.
The sunshine crowd bamboozled the press on this big time. Articles such as this one: U.S. Economy: First Quarter May Have Been Low Point — report conjecture as fact and completely ignore what the actual data is. The WSJ was no better: Slow Growth May Presage Pickup.
Here are the facts: The U.S. economy grew last quarter at
the slowest pace in more than four years. The initial GDP report of 1.3% was actually more than double twhat the updated data showed, and was 25% below economists consensus. Housing, slack capex investment, declining consumer activity all are responsible for part of the slowdown.
Meanwhile in Europe, Business Investment has picked up dramatically. Europe’s economy is growing about 4X the rate of the US in Q1.
Also included in the Commerce Department Data was that consumer spending was revised upward, to 4.4% from 3.8%. Note that if not for this revision, we would be talking about a sub 0% GDP. That would be the first quarter of 2 needed for the official measure of a recession.
How is it possible that consumer spending rose, when 80% of retailers have been missing numbers? Easy: Rising prices (not sales) in food and energy. You know, those elements the Fed hates to measure when it comes to inflation.
How and why most economists think that this is the low point is simply beyond me.
U.S. Economy: First Quarter May Have Been Low Point
Bloomberg, May 31, 2007
Europe’s Economy Grows 0.6%, Led by Investment Surge
Bloomberg, June 1 2007
Slow Growth May Presage Pickup
Thinned-Out Inventories Mean More Output Ahead; Consumers Propel Economy
WSJ, June 1, 2007; Page A2