Day By Day

Thursday, October 29, 2009

the recession is over! the recession is over!

Or is it?
I usually don't comment on current economic events.
But the numbers today suck.
They show 3.5% annualized GDP growth, which is undeniably in and of itself good.
But the components are not good: while the cash for clunkers shows up with a +22% for consumer durable goods, nondurables are only up 2%; nonresidential investments remain firmly negative, with only residential showing as 23% increase due to the various stimulus plans. In other words, we see the stimulus growth, but it is failing to bring anything else up to speed.
Remove those two and you're firmly back into negative territory.
This means the recession really isn't over: it only looks that way. Exports were up 15%, but imports were up 16%, due to the weak dollar and strong oil prices.
The real key to understanding what is going on is that incomes remain down and tax revenue is up; wages and salaries are down, personal outlays are up, which means that the savings rate went from 5% to just over 3%. This is exactly the opposite direction these numbers should be moving in: this recession isn't over yet.
This recession isn't over. If you look at the numbers from last year, GDP is down 2.3% and investments are down 25%; looking at an index with 2005=100, investments are now at 70% of that level.
This recession won't really be over until investments are back and incomes start climbing. The US economy may have stopped digging itself into a deeper hole, but it still hasn't even taken a look at how to get out of the one it dug.
This is a stimulus-driven recovery quarter that has no stamina.
Ye gods.

I believe a real economist before I'll believe a spin master working for the man...

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