On Friday, the U.S. Department of Commerce released its preliminary 4th Quarter GDP calculation, which came in at a whopping 5.7% growth.
It almost certainly will be revised lower. I’ll remind you that 3rd quarter GDP started at 3.5% growth in its first estimate, only to be revised downward twice, to eventually settle at a 2.2% growth rate. From 3.5 to 2.2 — that’s a haircut of 37%!
The GDP number can be affected by many factors. What does the government credit with the big jump in growth? From the BEA:
The increase in real GDP in the fourth quarter primarily reflected positive contributions from private inventory investment, exports, and personal consumption expenditures (PCE).
The effect of inventory building account for almost 60% of the 5.7% reported growth rate. And I believe REAL growth in the REAL economy was much lower, for a simple reason: Total use of all kinds of petroleum and natural gas products dropped from an average 19.2 million barrels per day equivalent in the fourth quarter of 2008 to an average 18.8 million barrels per day equivalent in the fourth quarter of 2009.
How do you get economic growth without fuel consumption? Unless Americans are buying a heck of a lot of electric cars – and factories are running on rainbows and unicorn farts – you don’t. Only some of this could have come from increased efficiency and use of alternative fuel. The rest, well … it could be that somebody’s fudging some numbers somewhere.
What’s more, the real economy is almost certainly continuing to slow down. How do I know that? Right now, Americans are burning less gasoline than they did a year ago, according to a report this week from the Energy Information Administration. The EIA says the country’s appetite for petroleum products has dropped every week this month. The drop-off in gasoline usage is noticeably acute.
What’s more, the Daily Treasury Statement for the month through January 28 shows $132.8 billion in withholding taxes paid this year vs. $142.9 billion a year ago. That’s a decline of about 7%. So the miracle recovery is happening without an increase in energy OR payrolls.
So no, I don’t buy the government’s story on economic growth. In fact, I think the economy is declining and that decline is picking up momentum.
This decline doesn’t have to be the end of the world. In fact, it could be turned around by a second stimulus package that focuses on creating jobs. But President Obama had better get cracking if he wants to do that (with this administration, I’ve learned to judge by actions, not words).
The bigger question that Americans should be asking themselves: If the government is flat-out wrong about economic growth – something we can see right in front of us – what else could they be wrong/hiding about the economy?
Related Posts
- The Musical Chairs of Government Stimulus (12/14/09)
- The Finance Industry Has Captured Our Government (08/12/09)
- Gold Near Make-or-Break Point (01/22/09)
- Updated Crude Oil Numbers — Big Build! (04/22/09)
- So What’s Up With Oil? (04/15/09)
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