Friday, July 30, 2010

GDP...Yawn!

Just a few notes before I head off for a little R&R for a few days.

GDP for Q2 came in at 2.4%.  The majority of the growth seen in the report was mainly increased government spending and inventory builds as manufacturers ramp up inventories to get ready for our incredible economic recovery(good luck with that!).

The reality here is that the consumer continues to sit on the sidelines.  If you take a look at the consumer growth index it confirms the continued slowing of the US consumer:


My Take:

As you can see above, the distortion between the BEA's GDP growth and the actual private consumer demand in the economy has never been larger in the past few years.  This does not bode well for the future.

If this trend continues, manufacturers will slash production as the expected recovery never materializes.

The Chicago PMI came in higher than anticipated which shouldn't be a surprise when you look at the inventory builds in the GDP number.  The builds were responsible for about 50% of the GDP growth in the quarter..

Q1 GDP was revised downward to 2.7% from 3.2%(what a shocker).

So let's recap here:

The last three quarters of GDP growth are 5.6% in Q4 2009, 2.7% in Q1 2010, and 2.4% for Q2 2010.  Anyone noticing a trend here?

This is one heck of an impressive recovery!(scarcasm off)

The Bottom Line

The GDP numbers are pretty much a joke at this point.  The bottom line here is private demand is nowhere to be found.  The market was down on this report but has since rallied after better than expected Chicago PMI and consumer sentiment reports.

I don't see this holding by the close.  We probably end the day flat give or take a few points.  Wouldn't be shocked if we ended down pretty sharply.  The bond market read right through the BS filled GDP report.

Yields once again plummeted below 3% on the 10 year this morning.

Folks, if the economic recovery doesn't take hold companies will slash inventories which will most likely put GDP back in the red and into a recession. 

The leading indicators on the consumer show that demand has once again fallen off a cliff as seen by the chart above.

All I can say here is don't believe the hype and raise cash!

Disclosure:  No new positions taken at the time of publication.

7 comments:

getyourselfconnected said...

Juat unreal the revisions, but nobody cares. It's like bizzaro world out there.

Have a great weekend Jeff!

Jeff said...

Get

You too man.

People are starting to care. Did you see the bond yields? The big money is running scared into treasuries. The market dislocations are beyond f'ed up.

This is flat out frightening to watch. Somethings gonna give here. Just a matter of when. Plan on drinking heavily this weekend.

Crazy times

CT-Hilltopper said...

Have a great weekend, sweetie.

We all have to get away. Some of us longer than others. I'm speaking of myself, of course. Real life keeps beckoning, and I am heeding it's call. The world can go to hell on it's own. It doesn't really need me to obsess over it. It doesn't need for you to do it either.

I would say be good but...just have fun!

Jeff said...

Ct

I hear ya. On atlantic city for the weekend. Played my last hand of cards at 7:30am this morning. Needless to say it was a fun night! Haven't thought about the markets once and it feels great to get away.

getyourselfconnected said...

What kind of cards do you play? I oove hold em poker and soon it will be legal to play online again!

I got rib cook pics up as well!

CT-Hilltopper said...

I love poker, but I'm lousy at it.

I rarely play.

Have I sandbagged you enough yet? LOL

We three have so much in common, it's uncanny.

Jeff said...

LOL

I am BEAT.

Played lots of Pai Gow. Great game if you just wanna drink and not lose a lot.

Lost yesterday won the other day. Net loss of course overall.

Also played craps, BJ, slots, let it ride, 3 card poker.

I was basically a total degenerate the whole weekend..LOL