The IUSB Vision Weblog

The way to crush the middle class is to grind them between the millstones of taxation and inflation. – Vladimir Lenin

Shocker: AP gets a story right about the GDP quarterly growth.

Posted by iusbvision on February 15, 2010

Usually the elite media is so bad that I am just filling you in on the worts of the worst, but I found an article on the 5.7% growth in GDP last quarter that actually had a good, solid factual point that they weren’t trying to spin for Obama. That surprised me so I am writing about it.

Before I go on, 5.7% my rear, as we have pointed out and the article rightly points out, consumer spending is in the tank and without consumer spending real growth doesn’t take place, only growth on paper does. Just like the rosy growth news of the last quarter, I fully expect this 5.7% number to be adjusted down next month, not because I delight in seeing Obama’s wasteful spending fail, but because of the obvious, when the consumers and investors have low confidence, the economy doesn’t boom.


WASHINGTON (AP) — The economy boomed at the end of 2009, growing at the fastest rate in more than six years. Now if only it could keep it up.

The economy expanded at an annual rate of 5.7 percent in the fourth quarter, the second straight quarter of growth. But analysts warn it’s unsustainable.

Consumer spending, chilled by double-digit unemployment and scant wage gains, remains weak. And the benefits of government aid and higher company output to feed stockpiles will dwindle.

Many analysts predict gross domestic product will expand at a rate closer to 2.5 to 3 percent in the current quarter and 2.5 percent or less for the year.

That won’t be enough to significantly reduce the unemployment rate, now 10 percent. In fact, most analysts expect the rate to keep rising for months and to remain close to 10 percent through year’s end.

To drive down the jobless rate by just 1 percentage point this year, the economy would have to grow by 5 percent for the whole year. No one thinks that will happen.

Until companies step up hiring and raise pay, consumers will feel squeezed. For all of last year, workers’ compensation rose by the smallest amount on records going back more than a quarter-century.

“Consumers are walking, not running,” said Ken Mayland, president of ClearView Economics.

Roughly two-thirds of the quarter’s growth came from increased manufacturing as businesses drew down their stockpiles of goods at a slower rate. But companies will eventually let those inventories fall again unless consumers — who account for about 70 percent of the economy — spend more.

Bingo..refering to the part in bold text.

Much of the “growth” is nothing more than government printing money and having politicians spend it, but the inventory spending is the lions share of the portion this quarter.

To translate, when the economy falls businesses stop refilling their inventory, they sell what they have on hand and in storage until they are forced to buy. These inventories are there as a buffer for supply issues, market shocks and changes in the economy. Eventually businesses have to have something to sell even if sales are down so after a time they restock their inventories. The AP has reported this properly, but should have explained it for the lay people.

One Response to “Shocker: AP gets a story right about the GDP quarterly growth.”

  1. […] up from their decreased spending. The media did get this right about the inventory replenishing (LINK) and the result is an uptick in employment. This uptick usually doesn’t last long as […]

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