A Sorry GDP

The first quarter GDP number may help the GOP numbers. Coming in at a puny 2.2%, the GDP number does not suggest that the president is on a smooth path to reelection. Generally, an incumbent president can feel optimistic about his chances if the GDP is at least 3%; better if it is higher.

Doesn’t look like anything the Obama administration has done has fueled a recovery. The recent industrial production number that came in at a negative 4.something% suggested that inventories had been replaced post Christmas and were sitting on the shelves without movement. Today’s consumer spending surge, I think, indicates not so much that the consumer is confident, but that the change of seasons necessitated him/her buying things, probably charged, without cash to back it up.

The ever succinct, spot on ZeroHedge evaluates it here:

So much for the +3.0% GDP whisper number. Instead of printing at the expected number of +2.5%, the first preliminary GDP data point (two more revisions pending) came out at 2.2%, a big disappointment for a quarter which had a substantial boost from the weather. And while of the 2.2%, Personal Consumption came in strong – as expected, as it was precisely the factor most impacted by pulling in demand forward courtesy of “April in February”, 0.59% of the 2.2% was an increase in inventories, something which was not supposed to happen as it means that the quality of the economic growth in Q1 was far worse than expected. Cementing the ugly composition of Q1 GDP was fixed investment which added just a paltry 0.18% – this is the number which is critical for ongoing cashflow generation and unfortunately, the very low print means that growth outlook for Q2 is now even worse than before and we expect economists will promptly trim their already bearish predictions for Q2 GDP. Finally, government “consumption” subtracted just 0.6% from the total number, a decrease from the 0.84% in Q4, which means that once again the government is starting to become less of a detractor to growth – a dagger in the heart to anyone who claims there is “quality” in GDP growth.

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