While Obama praised how well he is doing with the economy and supporters are fist bumping each other bragging about an alleged 5.7 percent gain for 2009’s fourth quarter, it appears all may not be as it seems.
“But when you look a little more closely at the numbers, it quickly becomes apparent that it’s hardly time to start breaking out the champagne. A big part of the latest GDP gain comes from a statistical adjustment for changes in inventory levels that don’t reflect real growth. Over the past year, businesses cut deeply into those inventories — not wanting to get stuck with unsold goods. Now that they’ve cut them to the bone, the rate of inventory-cutting has slowed. The way the GDP is calculated, that slowdown adds to “growth” — even though it doesn’t reflect increased production or sales. If you back out that inventory adjustment, GDP grew only 2.2 percent.”
“Friday’s report was the preliminary reading on GDP, which will be revised twice before it’s final. Last time around, the number for the third quarter of 2009 started out at 3.5 percent before pared back to 2.2 percent for the final report. That could well happen this time around. Mike Englund at Action Economics thinks today’s number overestimated the drop in imports because the preliminary numbers may have overestimated the drop oil consumption. He says that accounted for a full percentage point of the 5.7 percent gain in the fourth quarter.”
“Even if the preliminary number holds through two rounds of revisions, few economists see that kind of growth as sustainable. A panel of economists surveyed by msnbc.com said they see U.S. GDP moving ahead at 2.7 percent this year.”
Government hand-outs are not really growth.
