Misleading GDP overstates ECONOMIC GROWTH
Misleading GDP overstates ECONOMIC GROWTH
Again, it appears that the calculated GDP has overstated actual economic growth. Today's published GDP figure of 3.8%, is the same as the last quarter of 2004. However, growth of the 2/3's of economic activity due to consumer spending is slowing. The "final sales" growth, which many consider a better indicator of "growth," has declined for the 2nd straight quarter. In addition, growth of most "investment" parameters are also slowing.
The link to these numbers can be found at Briefing.com's GDP section at: http://www.briefing.com/Silver/Calendars/EconomicReleas...
The 1st quarter GDP has now been revised upward to 3.8%. Again, this is the same as the 4th quarter of 2004. However, of the multiple factors used to compute this number, only 2 have increased significantly. The 1st of these is INVENTORIES, which increased from $47.2 billion in the 4th quarter of 2004 to $66.8 billion in the 1st quarter in 2005. This is a 42% increase over the previous quarter. The 2nd major increase was in "residential investment." (Housing & Real Estate) Here there was a 338% growth in the 1st quarter of 2005, from 3.4% in Q4, 2004 to 11.5% for Q1, 2005.
Final sales growth declined for the 2nd straight quarter. Final sales growth decreased to 3.0% from the 4th quarter's 3.4%. This marks a 13% DECREASE. The 4th quarter's final sales also decreased from the 3rd quarter's 5.0%. Thus, GDP sales are not keeping up with the measured GDP. Ultimately, the GDP must be sold to create profits. The declining "final sales" growth, in relation to the the total GDP, suggests the GDP is overestimating economic growth.
All other measures of consumer spending declined as well. Total personal consumption spending (PCE) growth decreased to 3.6% from the 4th quarter's 4.2%. All 3 components of PCE declined as well. Durable goods sales growth decreased 54%, declining from 3.9% in the 4th quarter to 1.9% for Q1 of 2005. Nondurable goods and services also decreased.
Nonresidential investment growth also decreased 72%, from 14.5% in Q4 of 2004, to 4.1% in the 1st quarter of 2005. Not only did growth in nonresidential investment not increase, it actually decreased in Q1 of 2005. The growth rate was actually -2.4%. Growth in equipment and software investment decreased from 18.4% in Q4, to 6.1% in Q1 of 2005.
Thus, GDP growth was maintained almost exclusively from increased real estate investment and increased unsold inventories. All indexes of consumer spending growth decreased. This comes as no surprise, considering inflation-adjusted wages also decreased during that time. Decreased consumer spending power usually decreases consumer spending.
It appears the calculated GDP has again overstated actual economic growth. Goods are being produced in excess of what consumers are purchasing. Excessive goods production drives down demand for labor to produce goods. This decreases the number of employed workers, as well as wages of those who are still employed. This results in a further decrease in the aggregate consumer income necessary to purchase goods.
Growth of inventories and real estate investment are all that have increased during the 1st quarter of 2005. Does this really represent economic "growth"? Doesn't declining growth in consumer spending imply an economic slowdown? Do isolated increases in unsold goods and real estate investment truly indicate economic growth? Can unsold goods and real estate investment really be substituted for consumer spending? Can profits lost from declining goods sales be replaced by production and investment increases? How does that increase profits? Doesn't someone have to buy products for profits to be made?
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GDP link error
My apologies for not posting the GDP link correctly. The Briefing.com GDP link should be
http://www.briefing.com/Silver/Calendars/EconomicReleases/gdp.htm
http://www.unlawflcombatnt.blogspot.com/
Really?
What a surprise! This administration can no longer tell the truth from the lies. How is the GDP for Halliburton ? Now that they are serving our children ammunition laden sandwiches and rotten food. What a company! With our own countrymen working so hard to help our troops, it is a wonder that any of the soldiers have even stayed there. I guess the Republicans in Congress don't have the menu for G.I.'s to read. Hamburger a la bullet or peas with shrapnel. I long for the days when truth is back in political vogue. Politics should be an ethical profession that attracts people who want to work for the welfare of their constituents. How naive I am! No, how self-serving, egocentric, and uncaring this administration is. We the People are not inconsequential. We deserve to have a chance to life, liberty, and the pursuit of happiness with jobs and truth from our government.
False Statistics
This is just one of many examples of the Bush administration's alteration of statistics to obscure how bad our economy actually is. How does GDP actually increase if there less money to buy production?
Since the end of January 2005 through May 2005, inflation-adjusted hourly wages have decreased 1.8% ( from $8.32/hour in January to $8.17/hour in May) Again, these are inflation-adjusted wages calculated by the Bureau of Labor Statistics. At this rate, hourly wages are decreasing at a 5.4% annual rate.
Home sales and new home sales are another favorite target of the Bush "fact-creation" machine. For the most recent month the Bush "fact-creation" machine has downwardly revised previously posted statistics. For the 2nd month in a row, they have downwardly revised previously posted "New Home Sales " numbers. Both times, this allowed them to claim that new home sales increased for the current month, despite the current number actually being lower than that posted the preceeding month. This was accomplished by simple "revisionist history."
New home sales for March were initially reported to have increased to an annual sales rate of 1.431 million/year. This was reported as "the highest rate ever." Following this, the April new home sales were reported to have INCREASED to 1.316 million/year. Increased?? Yes, because they downwardly revised the previously reported March home sales to 1.313 million/year.
Now the May new home sales figures are in. Again, they have INCREASED to 1.298 million/year, "the second highest level in history." Increased?? Yes, again they downwardly revised the previous numbers given for April, from 1.316 million to 1.271 million/year. The link for this housing report by AP news , posted on Yahoo, is as follows:
http://news.yahoo.com/s/ap/20050624/ap_on_bi_go_ec_fi/economy;_ylt=AuUqg...
The following are links to the respective Economic Calendars that show the revisions made:
for this week: http://biz.yahoo.com/c/e.html
for the week of 5/21: http://biz.yahoo.com/c/ec/200521.html
unlawflcombatnt
EconomicPopulistCommentary
http://www.unlawflcombatnt.blogspot.com/
______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.
There must be balance between the "means of consumption" and the "means of production."
Economic Data Update
MISLEADING Non-Manufacturing ISM INDEX
The numbers for the non-manufacturing ISM (Index of Supply Management) were published today. Today's publication is being given the typical positive spin it usually receives from the Bush adiministration, Wall Street, and the financial "experts."
The Non-Manufacturing ISM index is sometimes refered to as the ISM Service index. It is derived from a monthly survey of over 370 companies. Respondents are questioned on the previously mentioned monthly indicators: new orders, employment, inventories, supplier delivery times, prices paid, order backlogs, export orders, and import orders. Those surveyed are asked to rate each indicator as higher, lower, or unchanged for the month. (With "delivery times," they are asked to rate it as faster or slower.) They are not asked for specific numbers - only a thumbs up or down.
Readings above 50 are indicative of growth. The higher the number, the more growth. The closer to 50, the closed to now growth. (under 50 indicates CONTRACTION, or shrinkage.)
Unlike the ISM manufacturing index, the total non-manufacturing ISM index is NOT calculated from the 8 individual numbers. Instead it is derived from answers to separate set of questions.
In general, the ISM index is supposed to be an idicator of the health of the service-producing and non-manufactured goods-producing industries.
Today's report (July 6, 2005) showed a total index increase to 62.2, following May's 58.5, which had been the lowest in 2 years. June's 62.2 was slightly higher than April's 61.7, but still lower than March's 63.1. So June's index index is stll lower than March's, indicating an overall slowdown in growth over the last 3 months.
June's employment portion of this index was 57.4, which is higher than May's 53.4, but still lower than February's 59.6. This indicates an overall slowdown in employment growth over the last 4 months.
June's new orders index declined to 59.5, from May's 59.7. This marks a 2.6-point decline from March's 62.1. Again, the total index had declined over the last 3 months.
June's export index of 50 marks a huge decline from May's 62. June's 50 marks a 0% increase in exports. (All of our free trade/free slave treaties have done us a lot of good, haven't they. We've certainly "opened up" a lot of markets, haven't we.)
June's import index (unlike the export index) did increase. June's 58.5 increase marke a 1 point increase over May's 57.5. So our Import-Export balance changed 13 points in favor of imports. So here, the index of our non-manufacturing trade deficit worsened by 13 points, or about 11%.
The link for this can be found at:
http://www.briefing.com/Silver/Calendars/EconomicReleases/napmserv.htm
Just remember, in spite of the constant onslaught of negative indicators, our economy really is strong. So we must not let facts mislead us. We must keep telling ourselves: "The economy is strong, the economy is strong, the economy is strong." Chant this at least 3 times per day. Maybe saying it will make it so. Or maybe not.
unlawflcombatnt
http://www.unlawflcombatnt.blogspot.com/
___________
The economy needs balance between the "means of production" & "means of consumption."