Could there be anything more ironic than Larry Kudlow and his cadre of proud American “free” marketeers beaming with glee over yesterday’s GDP report which showed positive growth due in large part to a substantial increase in federal government spending?I suppose under the current circumstances, big government consumption and the ultimate in “shock and awe” centrally planned manipulation of the markets of the “goldilocks” economy fit well with the Kudlow Creed.
Hypocrites.
For those looking for something a little more substantial I offer you a better path.
It’s called… (drum roll please)… “Reality”!
The truth is, the GDP report yesterday disclosed a number interesting data-points that, taken together with our working knowledge of the major issues at hand, provide clear evidence that the economy has hit the skids.
First, noting the obvious, Residential Fixed Investment is WAY down registering the ninth consecutive, and largest, negative quarter and the fifth (third consecutive) in which the decline erased over a full percent point from overall GDP.
Non-residential fixed investment declined substantially with both investments in structures and equipment and software simultaneously showing a notable drop-off, an unusual occurrence in an expanding economy.
Durable goods showed a rare and solid decline with the most notable weakness coming from motor vehicle, housing and furniture related spending.
Non-durable goods spending declined for food, fuel and other items and showed anemic growth for clothing and shoes while personal recreational services declined for the first time in at least three years.
Finally, aside from the strong contributions made by Federal government spending, there was a jump in private non-farm inventories that, although contributing .93% to overall GDP, may be signaling an unhealthy inventory build consistent with a recessionary environment of lower consumer spending.
Given what we know about the severity of the collapse of housing economy and its obvious effects on households and firms across America, should any of the above come as a surprise?
Would a recession really be a surprise? Even a severe recession?
So while Kudlow et al. continue to turn to the “predictions” rendered through the use of the internet gambling site Intrade for encouragement, why not stick to the fundamental trends that are so clearly taking shape and plan accordingly.
