Post by unlawflcombatnt on May 31, 2007 16:00:17 GMT -6
Today's GDP report for the 1st quarter of 2007 was revised sharply downward, from the previous guesstimate of +1.3% down to +0.6%. This came mainly from the downward revision of inventories, from +$14.8 billion down to -$4.5 billion, and from a worsening trade deficit, from -$15 billion down to -$29 billion. The 2 of these totaled -33.3 billion. If this had been subtracted directly from the $36.1 billion total from the "advanced" GDP report on April 27, 2007, it would have left a total 1st quarter GDP growth of only $2.8 billion, or less than a 0.1% annualized GDP growth. However, other numbers were conveniently revised upward, bringing 1st quarter GDP growth up to +0.6% annualized. Below is a bar graph from Briefing.com showing the trend in GDP growth.
It's also worth noting that all "current dollar" totals for GDP are adjusted downward for inflation, denoted in terms of "chained 2000 dollars." There is one peculiar exception to this inflation-adjusted, downward revision: Durable Goods. The current dollar value of Durable Goods is actually revised upward when using "chained 2000 dollars." (This can be seen in the table below. The key Durable Orders numbers are underlined in blue.)
The actual recorded "current dollar" value for Durable Goods increased $17.7 billion (from $1,075.8 billion to $1,097.5 billion). However, the inflation-adjusted increase (denoted by "chained 2000 dollars") was larger, at $25.9 billion (from $1,221.9 billion to $1,247 billion). In other words, unlike every other GDP subtotal, adjusting for inflation actually INCREASED the total dollar-value of Durable Goods by +$8.2 billion. Had there been no inflation adjustment for Durable Goods, the increase would have actually been less. And if there had been no inflation-adjustment for Durable Goods, the total 1st Q GDP growth would have been only only $10.5 billion, instead of $18.7 billion. This would have resulted in only a +0.36% increase in 1st quarter GDP, instead of +0.6%.
Despite the obvious slowdown in the economy, the stock market continues to hit record highs. Clearly there is now a complete disconnect between the economy and the stock market. It appears that investors' delusional optimism trumps facts and actual statistics. It reminds me of the saying: "Don't confuse me with the facts."
It's also worth noting that all "current dollar" totals for GDP are adjusted downward for inflation, denoted in terms of "chained 2000 dollars." There is one peculiar exception to this inflation-adjusted, downward revision: Durable Goods. The current dollar value of Durable Goods is actually revised upward when using "chained 2000 dollars." (This can be seen in the table below. The key Durable Orders numbers are underlined in blue.)
The actual recorded "current dollar" value for Durable Goods increased $17.7 billion (from $1,075.8 billion to $1,097.5 billion). However, the inflation-adjusted increase (denoted by "chained 2000 dollars") was larger, at $25.9 billion (from $1,221.9 billion to $1,247 billion). In other words, unlike every other GDP subtotal, adjusting for inflation actually INCREASED the total dollar-value of Durable Goods by +$8.2 billion. Had there been no inflation adjustment for Durable Goods, the increase would have actually been less. And if there had been no inflation-adjustment for Durable Goods, the total 1st Q GDP growth would have been only only $10.5 billion, instead of $18.7 billion. This would have resulted in only a +0.36% increase in 1st quarter GDP, instead of +0.6%.
Despite the obvious slowdown in the economy, the stock market continues to hit record highs. Clearly there is now a complete disconnect between the economy and the stock market. It appears that investors' delusional optimism trumps facts and actual statistics. It reminds me of the saying: "Don't confuse me with the facts."