Economy in U.S. Grew at 5.7% Pace, Most in Six Years

[WildspitzE]

Economy in U.S. Grew at 5.7% Pace, Most in Six Years
http://www.bloomberg.com/apps/news?p...EDAkgBlc&pos=1

"
Jan. 29 (Bloomberg) -- The economy in the U.S. expanded in the fourth quarter at the fastest pace in six years as factories cranked up assembly lines and companies increased investment in equipment and software.
The 5.7 percent increase in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance since the third quarter of 2003, figures from the Commerce Department showed today in Washington. Efforts to rebuild depleted inventories contributed 3.4 percentage points to GDP, the most in two decades. "

Member commentary?

All I can muster is a: LOL + facepalm,

[WildspitzE]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

http://finance.yahoo.com/news/Wages-....html?x=0&.v=1

"Wages and benefits rise in 2009 by smallest amount on records going back 27 years"


...now just an expected .

[Jim Nickerson]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

Below is what Bruce Krasting wrote last evening before the numbers.

http://brucekrasting.blogspot.com/20...gdp.html#links

This number has potential to cause a stir if it comes in south of 4% or north of 5%. The numbers in the middle are ‘baked in the cake’.

If the number comes in at 3.5% (or less) I would expect:

-Stocks will fall.
-Bonds prices will rise.
-Gold will rise.
-The dollar will fall.
-A number of economists will be scratching their heads.
-There will be renewed talk of a ‘double dip, starting sometime in the 4th Q.
-Larry Kudlow will misread the number and will hail the day as a triumph of capitalism and the free market economy.
-The White House will make a statement that they are responsible for the turn-around.

If the number comes in at 5% (or higher) I think the following happens:

-Stocks will rise.
-Bonds will get crushed.
-Gold will be steady.
-The dollar will be steady.
-A number of economists will be scratching their heads.
-There will be talk of the economy over-heating; some will express concerns over inflation.
-Larry Kudlow will hail the day as a triumph of capitalism and the free market economy.
-The White House will make a statement that they are responsible for the turn-around.

[GRG55]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

Economy in U.S. Grew at 5.7% Pace, Most in Six Years
http://www.bloomberg.com/apps/news?p...EDAkgBlc&pos=1

"
Jan. 29 (Bloomberg) -- The economy in the U.S. expanded in the fourth quarter at the fastest pace in six years as factories cranked up assembly lines and companies increased investment in equipment and software.
The 5.7 percent increase in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance since the third quarter of 2003, figures from the Commerce Department showed today in Washington. Efforts to rebuild depleted inventories contributed 3.4 percentage points to GDP, the most in two decades. "

Member commentary?

All I can muster is a: LOL + facepalm,

From Barry Ritholtz's Big Picture this morning:

Best Economic Gauge You’ve Never Heard Of

While everyone awaits GDP data this morning, why don’t we look at the best economic gauge you have never heard of:

It doesn’t appear on any economic calendars that I’m aware of. It flies under just about everyone’s radar. Technically, it’s not a data point itself but a weighted amalgam of 85 other distinct economic data points, an all-in-one look at the United States economy.

And it does an excellent job of tracking the economy’s health.

It’s the Chicago Fed’s National Activity Index (CFNAI), and it just printed for December.

Say the folks in Chicago:

The CFNAI is a weighted average of 85 existing monthly indicators(pdf) of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

The 85 economic indicators that are included in the CFNAI are drawn from four broad categories of data: production and income; employment, unemployment, and hours; personal
consumption and housing; and sales, orders, and inventories.

Each of these data series measures some aspect of overall macroeconomic activity. The derived index provides a single, summary measure of a factor common to these national economic data.

Additionally, they advise us to focus on the three month moving average:

Month-to-month movements can be volatile, so the index’s three-month moving average, the CFNAI-MA3, provides a more consistent picture of national economic growth.
When the CFNAI-MA3 value moves below –0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun.

When the CFNAI-MA3 value moves above +0.70 more than two years into an economic expansion, there is an increasing likelihood that a period of sustained increasing inflation has begun.

That said, here’s the chart:



The MA3 has stalled since hitting -0.54 in September, recording -0.76, -0.68, and now -0.61 since then. We’ve gotten the bungee bounce off the economic and market lows of almost one year ago. The question now — as I’ve been opining for quite some time — is to sustainability. We’re clearly faltering, with nary a green shoot in sight (witness the just-released Durable Goods orders and weekly Unemployment Claims, which were both weaker than expected). Lots of interesting numbers coming out over the next week, culminating with Friday’s jobs report. The stock market is, perhaps, starting to recognize the loss of momentum.

[Tybee Island]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

The Government and this administration are right at the precipice of losing the public's confidence.

How many times will this morning's GDP number be revised in the months to come? Will the MSM stop to go back and remember the false enthusiasm experienced upon today's release?

No one trusts these numbers and I think the more fantastic they appear, the more possibility of an imminent crash.

[ST]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

The Government and this administration are right at the precipice of losing the public's confidence.

How many times will this morning's GDP number be revised in the months to come? Will the MSM stop to go back and remember the false enthusiasm experienced upon today's release?

No one trusts these numbers and I think the more fantastic they appear, the more possibility of an imminent crash.

Don't forget the street estimate was for 4.7%.

Have they successfully restarted the FIRE economy?

[Thailandnotes]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

"U.S. economy soars in fourth quarter of 2009"

Despite the misleading headline, the Post got much of it right.

http://www.washingtonpost.com/wp-dyn...l?hpid=topnews

Whoops!

"U.S. economy soars in fourth quarter of 2009" This headline used to be linked to the url above. Now it links to something much mushier.

[ST]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

"U.S. economy soars in fourth quarter of 2009"

Despite the misleading headline, the Post got much of it right.

http://www.washingtonpost.com/wp-dyn...l?hpid=topnews

Whoops!

"U.S. economy soars in fourth quarter of 2009" This headline used to be linked to the url above. Now it links to something much mushier.

Good link - thanks Thailand.

It begs the question, though, why are companies restocking inventory, if demand hasn't picked up and doesn't look as though it will pick up?

Could this entire move be attributable to stimulus only - or is some of it organic? I think we should caution ourselves from jumping to a conclusion, without deciphering the data.

[ST]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

From Barry Ritholtz's Big Picture this morning:

Good post GRG.

If we have only spent 1/3 of the stimulus and the gov't seems to understand that they have to keep it coming, perhaps they can keep it going for much longer than any of us thinks. I think the admin came out and said in the state of the union that stimulus is critical - hard for me to see that the stock market is smelling that things will crater when stimulus runs out (as EJ said) when the admin is making clear that stimulus isn't going to run out esp. in an election year.

[due_indigence]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

The GDP is of course dollar-denominated. Wouldn't one expect significant nominal increases due to QE? As Marc Faber has said, the sky could be the limit for nominal advances in indices.

[rjwjr]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

If this number was true, then why was the State of the Union message so empathetic and pro-growth-policy laden?

If this GDP growth number was true then the State of the Union message would have been more a "hang in there, no need to do more, we've turned the corner, I'm your hero" message. What politician could pass up that opportunity? Answer: None.

The Administration had to have a good indication of the approximate GDP number prior to the SOTU address so the message of the address is inconsistent with the announcement of the growth, which in turn, is a clear indication that the announced growth is inconsistent with reality.

[thriftyandboringinohio]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

...why are companies restocking inventory, if demand hasn't picked up and doesn't look as though it will pick up?...

Inventory decisions are made by humans.

They don't want to be caught without finished goods on the shelf if things turn up a little. The sales people say they need to offer immediate delivery to capture the few orders out there. Their staffing levels are down to just a skeleton crew of their best people, and they can't fire the last good talent. So they put their plant to work building a little inventory and hope the green shoots are real.

It's the logical last-ditch, hail-mary action before admitting they are now half their former size, or out of business entirely.

[BigBagel]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

Despite the GDP news the S&P 500 is running about even @ 11:40 AM ET.

[ST]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

David A. Rosenberg Chief Economist & Strategist
Market Musings & Data Deciphering Lunch with Dave - The Houdini Recovery January 29, 2010 The Houdini Recovery The growth bulls are out in full force today in the aftermath of the headline 5.7% QoQ annualized print on fourth quarter GDP growth in the U.S. We offer a slightly different perspective. First, the report was dominated by a huge inventory adjustment — not the onset of a new inventory cycle, but a transitory realignment of stocks to sales. Second, it was a tad strange to have had inventories contribute half to the GDP tally, and at the same time see import growth cut in half last quarter. Normally, inventory adds are at least partly fuelled by purchases of foreign-made inputs. Not this time. Third, if you believe the GDP data — remember, there are more revisions to come — then you de facto must be of the view that productivity growth is soaring at over a 6% annual rate. No doubt productivity is rising — just look at the never-ending slate of layoff announcements. But we came off a cycle with no technological advance and no capital deepening, so it is hard to believe that productivity at this time is growing at a pace that is four times the historical norm. Sorry, but we're not buyers of that view. Fourth, while the Chicago PMI and the revision to the University of Michigan consumer sentiment index also served up positive surprises, the “hard” data in terms of housing starts, home sales and consumer spending suggest that there is little, if any, momentum heading into early 2010. Moreover, the prospect that we see a discernible slowing in the pace of economic activity this quarter and a relapse in the second quarter is non trivial, in my view — by then, today's flashy headline will be a distant memory.

[don]

Re: Economy in U.S. Grew at 5.7% Pace, Most in Six Years

In related news....

The details of President Obama’s small business tax credits are now becoming more clear. They are:

A $5000 tax credit for every net new employee

Small businesses that increase wages or hours for their existing employees will be reimbursed for the Social Security payroll taxes they pay on the increase payroll

Firms will be able to claim the credit on a quarterly basis.

Will this encourage you to hire more employees or increase wages. Are these tax credits more important than increasing the ability of small business to access capital?

I am getting calls from the media on this so I would appreciate your response.

Scott Hauge
President
Small Business California
2311 Taraval Street
San Francisco, CA 94116
shauge@cal-insure.com


Yesterday I was on the call with the White House people. I asked the question about continued stimulus funding for the SBA 7a and 504 loans. This funding would be used to continue the 90% guarantee on loans and the waiver of fees. It also would allow the SBA to make loans up to $5 million. Unfortunately my question did not get answered and it is not clear how much effort the President will make to make sure money is available after February.