Shedlock: market cheers over ugly GDP report

[picasso moon]

http://globaleconomicanalysis.blogspot.com/2009/10/market-cheers-over-ugly-gdp-report.html
Ugly GDP Report,that is, 10/29/09. His point isn't simply to contest the reason for the supposed great gain of 3.5% , but also to shed light on some of the other stats the media left out of their cheerleading accounts.

Today the market is cheering over what is actually an ugly report.
A misguided Cash-for-Clunkers added a one-time contribution of 1.66 percentage points to GDP. Auto sales have since collapsed so all the program did is move some demand forward.
Government spending increased at 7.9 percent in the third quarter which is certainly nothing to cheer about.
Personal income decreased $15.5 billion (0.5 percent), while real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent last quarter. Those are horrible numbers.
The savings rate is down, which no doubt has misguided economists cheering, but people spending more than they make is one of the things that got us into trouble.
The only bright spot I can find is exports. However, even there we must not get too excited as imports rose much more...
I am struggling to understand what is surprising other than how bad this all looks once you break down the numbers. The government sloshed trillions around and yet disposable income is down, jobs are horrendously weak, and the only reason GDP rose is wasteful government spending, cash-for-clunkers and extremely unaffordable housing tax credits whose effect is soon going to start diminishing even though the program was just extended.

[Ty Fjoyd]

Today the market is cheering over what is actually an ugly report.
A misguided Cash-for-Clunkers added a one-time contribution of 1.66 percentage points to GDP. Auto sales have since collapsed so all the program did is move some demand forward.
Government spending increased at 7.9 percent in the third quarter which is certainly nothing to cheer about.
Personal income decreased $15.5 billion (0.5 percent), while real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent last quarter. Those are horrible numbers.
The savings rate is down, which no doubt has misguided economists cheering, but people spending more than they make is one of the things that got us into trouble.
The only bright spot I can find is exports. However, even there we must not get too excited as imports rose much more...
I am struggling to understand what is surprising other than how bad this all looks once you break down the numbers. The government sloshed trillions around and yet disposable income is down, jobs are horrendously weak, and the only reason GDP rose is wasteful government spending, cash-for-clunkers and extremely unaffordable housing tax credits whose effect is soon going to start diminishing even though the program was just extended.

Good summary.

[cz]

People are earning less, nobody can afford to save, the government is borrowing its way into bankruptcy - Hooray! The plan is working!

[mousewizard]

"...Hooray! The plan is working!"

It looks like we'll at least make it through another quarter, which is more than I expected.

Christmas will tank; that's built in from three directions:

1) Retailers haven't stocked up like they normally do - remember the ghost fleet of container ships? Less inventory to sell means lower sales are guaranteed, even if Jane and Joe consumer opened their wallets wide.

2) Jane and Joe don't have the ability to spend on credit cards anymore. They're either maxed out or closed against massive interest rate bumps.

3) Jane and Joe are not blind; they're preserving what cash they can, so cash shopping isn't an option either.

Taken all together, Christmas sales will suck big time. When the reports start coming out about dismal sales post Thanksgiving, and continue through to the final set of bad news in late January, people will just get more and more conservative.

The next GDP report will not be nearly as rosy. I smell panic starting iin January and building from there. I think I'll avoid the rush and panic early.

[gnosis]

Agreed

Christmas *will* tank.

2010 will be a banner year.

[2handband]

"...Hooray! The plan is working!"

It looks like we'll at least make it through another quarter, which is more than I expected.

Christmas will tank; that's built in from three directions:

1) Retailers haven't stocked up like they normally do - remember the ghost fleet of container ships? Less inventory to sell means lower sales are guaranteed, even if Jane and Joe consumer opened their wallets wide.

2) Jane and Joe don't have the ability to spend on credit cards anymore. They're either maxed out or closed against massive interest rate bumps.

3) Jane and Joe are not blind; they're preserving what cash they can, so cash shopping isn't an option either.

Taken all together, Christmas sales will suck big time. When the reports start coming out about dismal sales post Thanksgiving, and continue through to the final set of bad news in late January, people will just get more and more conservative.

The next GDP report will not be nearly as rosy. I smell panic starting iin January and building from there. I think I'll avoid the rush and panic early.

You haven't read the Hitchhiker's Guide, have you?

Don't Panic!

[mousewizard]

You haven't read the Hitchhiker's Guide, have you?

Don't Panic!

And here I am killing mice in my storage shed. Bad move, I guess...

[cz]

Agreed

Christmas *will* tank.

2010 will be a banner year.

Only if by a "banner year" you mean a picture of TPTB in their mansions protected by security keeping the homeless/broke 'rabble' out, with a big "Mission Accomplished" banner behind them.