Thursday, May 1, 2008

Is it an Official Recession? NY Post says it Should Be

Very interesting comments from NY Post. Let's say for example that the faulty government report from 1 part of government says inflation is only 4%. But when you want to figure out GDP, another arm of government says, strike that we are only going to use 2.6%. Well you can magically make negative GDP turn into positive GDP.

If you had instead used 4% inflation rate - you'd have Q4 2007 as "negative" and Q1 2008 as "negative" and your "official definition" of recession is obtained. If you use 2.6%, you get no recession, not even a negative print once. Fun with numbers folks... fun with numbers; when you peel back the onion you see the truth, but we can't be bothered with such details ;)
  • The second thing that happened yesterday was the first-quarter estimate of the nation's gross domestic product - which is nothing more than the financial statement of the country. The Commerce Department estimated yesterday that the nation's economy grew at an annual rate of just 0.6 percent in the first three months of 2008. That was the same growth reported for the fourth quarter of last year.
  • Worse, it was government spending and inventory building by corporations that created most of the first-quarter gain. (again government spending is just getting us into more debt, and inventory building means in the future those prices will need to be slashed to move the stuff - but no matter)
  • Neither of those is something you want to rely on for a recovery. But the situation was even more dismal than that. In coming up with the 0.6 percent annual growth figure, the Commerce Department decided that inflation was just 2.6 percent.
  • Still, the 2.6 percent figure for price increases used for the GDP calculation was nowhere near the 4 percent inflation calculated by other government agencies.
  • If inflation, for instance, had been 4 percent then the nation's economy would have contracted by an 0.8 percent annualized rate. And not only that, if inflation was being honestly reported the economy would have contracted in the fourth quarter of 2007 as well.
  • In other words, there would have been two straight quarterly declines in GDP and the debate over whether or not we are in a recession would be settled.
And once again folks, this shows you if the government has enough time, they can make any number appear better than expected. Just another in a litany of examples of why it's best to ignore anything they say. But it's good enough to get this market happy. :) Somehow I doubt (cough) this was reported on CNBC... anyone hear it? ;)

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