The BEA is out with its Q4 first estimate of GDP (LINK). I look forward to a detailed analysis from Dr. Rick Davis when he has had time to prepare one.
Here are some brief comments. First, the BEA’s introductory summary:
Real gross domestic product — the output of goods and services produced by labor and property
located in the United States — decreased at an annual rate of 0.1 percent in the fourth quarter of 2012
(that is, from the third quarter to the fourth quarter), according to the “advance” estimate released by the
Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1 percent.
Consistent with the much-maligned view of ECRI, this estimate had a negative sign attached to it of 0.1%. Minimal, but negative.
This is below consensus. One of the positives, personal income, had some one-time factors boosting it due to fiscal cliff issues:
Current-dollar personal income increased $256.2 billion (7.9 percent) in the fourth quarter,
compared with an increase of $72.7 billion (2.2 percent) in the third. The acceleration in personal
income primarily reflected a sharp acceleration in personal dividend income, an upturn in personal
interest income, and an acceleration in wage and salary disbursements. The sharp acceleration in
personal dividend income reflected accelerated and special dividends that were paid by many companies
in the fourth quarter in anticipation of changes in individual income tax rates. The upturn in personal
interest income primarily reflected an upturn in interest rates for Treasury Inflation Protected Securities.
The acceleration in wages and salaries reflected the pattern of monthly Bureau of Labor Statistics
employment, hours, and earnings data for the fourth quarter, as well as a judgmental estimate of
accelerated compensation in the form of bonus payments and other irregular pay in the fourth quarter.
Consistent with the prior post about Boeing, the stock market has shrugged this one off.
Little matters anymore, it appears, except Fed action. Thus, the worse the data, the longer the Fed will print, so stock prices can never drop: a perfect equilibrium, n’est ce pas?
As Japanese investors have found out, that paradigm works until it does not.
We now have a certifiably dangerous stock market: arguably over-valued but subject to rising competition from bonds and real estate.