GDP Lies 1 Auto sales down 6% compared with last year! Oil imports up 23% Defense spending up over 15%! These are the real headlines from the GDP report yesterday, but you're not seeing the real numbers of corporate media. Instead we get happy talk and a Hooveresque "good times are right around the corner." Holy smokes, is this embarrassing. After spending 15 years as a reporter, I would have given more credit to my one time associates. Brother, was I ever off. Yes, the GDP numbers are completely hosed and in a moment I'll show you where the lies are buried and ask whether reporters can read (or they have no clue how to operate Excel). Or, more likely, they're just parroting what a ratings maven tell's 'em to or what the presidential "briefer" whisper in the media's ear. But let's not get personal. Let's dig up a few facts, shall we? First, let me give you the link to the underLYING data before I give you a lesson in how to read the numbers: http://www.bea.gov/bea/newsrel/gdp303a.xls Now let's go through the spreadsheet page by page and see what we can discover, OK? The first page is the contents page. It's a contents page -hard to screw this up. Table 1 shows the percentage changes for the most recent years and quarters. It's here that I first sniffed a rat. Long ago when managing companies I learned to always double check my spread sheets. They can be complicated and it is always worthwhile to turn on the "trace precedents" command which shows you where a particular number came from so you can audit your own work. Keeps out mistakes, right? Well lookee here: In this spreadsheet of "percents" there is NO LINKAGE SHOWN - so we can't trace back and see which number comes from where. You follow my point, right? If you come up with a BIG 7.2% headline increase that is way over expectations, I would like to know where the hell that came from. Table 1, cell T7 is just a number with no links - in fact none of this table is linked, so we can't look at round off errors - none of that. We go to Table 2 and we find the same thing - no links! Just numbers that could have come off a roulette wheel for all we learn from this spreadsheet. If an accountant prepared a document like this and presented it to me, I'd fire them. I want to know more than "what's the number?" I want to know "Where did that come from?" Finally at Table 3, we get to some useful numbers - and here's where the real fun begins. I decided to add a worksheet after Table 3 called George's math to see if I could smoke out a little economic truth, because I was beginning to suspise that the people who built this data monster were smoking something else. The first thing I did was wipe out all but the Billions of current dollars. Everything in column H and to the right is gone. Then I eliminated column B called "2002" I kept 2002:Q3 numbers because I want to compare them with 2003 Q3 numbers and see where we get, OK? So everything else goes bye-bye So now, we can look at Current dollars - side-by-side, got it? 2002:Q3 right next to 2003:Q3 Now I'm going to add two columns called Delta (2003 minus 2002) to show growth if unsigned, or shrinkage if a - (minus sign) Then we're going to run out the percentage change ((2003/2002)-1) and call it two places to the right of the decimal point. Ready for the Eye Poppers that will astound you? Let me roll 'em out for your dining and dancing pleasure. Remember now, this is Year-on-Year change in current dollars, seasonally adjusted. Off we go: 2002:Q3 2003:Q3 Delta YOY% Gross domestic product (GDP)... 10506.2 11038.4 532.2 5.07% Whatever the hell happened to the 7.2% happy-talk headline? OK, so the sleight of hand was that the 7.2% was only for the quarter. But let's dig down a bit further and see where the growth was, shall we? Delta YOY%Personal consumption expenditures. 7360.7 7766.5 405.8 5.51% Personal consumption expenditures didn't do much better than our "official 3 1/2% inflation rate which is really more like 8% on a monetary basis... Delta YOY% Durable goods................... 897.8 947.0 49.2 5.48% Motor vehicles and parts...... 400.7 422.9 22.2 5.54% Furniture and household equipment.................... 319.2 330.5 11.3 3.54% Other......................... 177.9 193.5 15.6 8.77% Hmmm...it was a banner year for "other", but I haven't looked up what that growth was made of. so let's go on to nondurable goods: Delta YOY% Nondurable goods................ 2116.9 2265.8 148.9 7.03% Food.......................... 1024.8 1103.6 78.8 7.69% Clothing and shoes............ 321.0 334.6 13.6 4.24% Gasoline, fuel oil, and other energy goods........... 178.2 207.6 29.4 16.50% Gasoline and oil............ 163.5 189.8 26.3 16.09% Fuel oil and coal........... 14.7 17.8 3.1 21.09% Other......................... 592.9 619.9 27.0 4.55% OK, what we see here is that there has been a huge increase in fuel oil and coal, while the rest of the increase in the oil patch was over 16%. That's the first headline that didn't make primetime that should concern you. Moving on to the Service Sector: Delta YOY% Services........................ 4346.0 4553.8 207.8 4.78% Housing....................... 1078.0 1124.0 46.0 4.27% Household operation........... 406.3 428.0 21.7 5.34% Electricity and gas......... 147.4 164.9 17.5 11.87% Other household operation... 258.9 263.1 4.2 1.62% Transportation................ 276.1 281.6 5.5 1.99% Medical care.................. 1158.8 1239.6 80.8 6.97% Recreation.................... 285.9 299.8 13.9 4.86% Other......................... 1140.9 1180.8 39.9 3.50% You'll see that Electricity and Gas prices went through the roof...up almost 12%. Medical was up 7%. See what I mean about interesting? Oh it gets better... Delta YOY% Gross private domestic investment. 1597.3 1656.0 58.7 3.67% When you take out monetary inflation, which is running in the same range, you'll see that the amount left over for private investment didn't go anywhere! Delta YOY% Fixed investment................ 1579.7 1693.0 113.3 7.17% Nonresidential................ 1109.8 1149.8 40.0 3.60% Structures.................. 259.4 257.1 -2.3 -0.89% Nonresidential buildings, including farm........... 171.1 174.2 3.1 1.81% Utilities................. 51.5 42.2 -9.3 -18.06% Mining exploration, shafts, and wells........ 31.0 35.0 4.0 12.90% Other structures.......... 5.8 5.7 -0.1 -1.72% Equipment and software...... 850.4 892.7 42.3 4.97% Information processing equipment and software... 406.9 442.5 35.6 8.75% Computers and peripheral equipment... 76.8 88.3 11.5 14.97% Software................ 186.3 195.5 9.2 4.94% Other................... 143.8 158.8 15.0 10.43% Industrial equipment...... 153.3 151.9 -1.4 -0.91% Transportation equipment.. 141.7 138.9 -2.8 -1.98% Other..................... 148.5 159.3 10.8 7.27% Residential................... 469.9 543.2 73.3 15.60% Structures.................. 460.4 532.9 72.5 15.75% Single family............. 245.3 287.1 41.8 17.04% Multifamily............... 33.4 36.6 3.2 9.58% Other..................... 181.7 209.2 27.5 15.13% Equipment................... 9.5 10.3 0.8 8.42% These figures speak for themselves, but with investment dropping in utilities, down 18%, we shouldn't be surprised. Surprisingly, there was a good pop in residential construction. Of course you have to take out exports, which seems to have improved a bit (we exported 432.9 in 02 and that was up to 488.6 this year, which looks like an improvement, but the trick shot here is that a lot of that probably went to which small Middle East country that we presently occupy? We'll probably never know... Delta YOY% Net exports of goods and services. -432.9 -488.6 55.7 12.87% The breakdown behind exports goes like this: Delta YOY% Exports......................... 1038.6 1059.7 21.1 2.03% Goods......................... 722.6 724.5 1.9 0.26% Foods, feeds, and beverages. 49.5 53.0 3.5 7.07% Industrial supplies and materials.................. 156.3 168.2 11.9 7.61% Capital goods, except automotive................. 301.7 291.5 -10.2 -3.38% Automotive vehicles, engines, and parts......... 82.5 77.6 -4.9 -5.94% Consumer goods, except automotive................. 86.0 90.7 4.7 5.47% Other....................... 46.7 43.5 -3.2 -6.85% Services...................... 316.0 335.1 19.1 6.04%
GDP lies 2 Imports were way up - more than 5% but more important look at energy imports! Up 23.31%...Yikes!: Delta YOY% Imports......................... 1471.5 1548.3 76.8 5.22% Goods......................... 1220.9 1274.3 53.4 4.37% Foods, feeds, and beverages. 50.4 54.8 4.4 8.73% Industrial supplies and materials, except petroleum and products..... 163.5 178.4 14.9 9.11% Petroleum and products...... 110.7 136.5 25.8 23.31% Capital goods, except automotive................. 285.3 291.4 6.1 2.14% Automotive vehicles, engines, and parts......... 210.0 205.0 -5.0 -2.38% Consumer goods, except automotive................. 315.0 329.3 14.3 4.54% Other....................... 86.0 78.9 -7.1 -8.26% Services...................... 250.6 274.0 23.4 9.34% The services imported is going up like crazy because of jobjacking...all those telemarketers in India and the customer service reps in the Philippines.. Now here is the whole point of the so-called recovery: There hasn't been one for most people. The "recovery" if you want to call it that, has been fueled by government spending. Check out the percentage changes: Delta YOY% Federal......................... 697.7 784.4 86.7 12.43% National defense.............. 451.2 520.1 68.9 15.27% Consumption expenditures.... 388.9 450.3 61.4 15.79% Gross investment............ 62.4 69.7 7.3 11.70% Nondefense.................... 246.5 264.3 17.8 7.22% Consumption expenditures.... 200.9 217.6 16.7 8.31% Gross investment............ 45.5 46.7 1.2 2.64% Delta YOY% State and local................. 1283.3 1320.2 36.9 2.88% Consumption expenditures.... 1039.6 1071.6 32.0 3.08% Gross investment............ 243.8 248.5 4.7 1.93% You got it: Defense spending is up nearly 16% and non-defense spending is up 7.22%. States are getting screwed. Now think about this: The Federal Reserve has been printing money like crazy. From September 2002 to September 2003 M-1, the narrowest measure of money printed is up 8.11% . With real GDP (less defense spending) up less than 5% Our colleagues at HalfPastHuman come up with a brand new way of polling public opinion called the "TakeRake" which shows almost no one believes the GDP numbers out yesterday (see http://www.halfpasthuman.com/takerake103003.htm) So although the national financial press corps has either no brains or balls (or both), most common sense folks can see through this latest wool pulling very clearly. Well, that's the Friday morning rip and rant. I got up at 5 AM to ponder the numbers and that's how they look. Not only do average people see the truth, but if the recovery was anywhere near as robust as the headline number, the market would have popped more than a dozen points, that's for damn sure. If it was real, the market would have charged up 200 or 300. Didn't happen because at least a few folks can still read.
Trade or do something else more constructive with your time. We are not all running out and buying AMG's because of yesterdays GDP number. BTW, the S&P is so impressed with the #'s that it can't even make a new high. :eek:
Have some faith in us! We are all smart enough to know what is going on in the economy.....we do not live by GDP #'s !