Last US GDP data. Modest Pace as New Normal?
The information about GDP for Q4 and the revisions of the previous of data does not add any significant value to our diagnosis: a low growth rate with a implicit deflactor that stays low mantaining open the window for a permanent QE if necessary.
And again what is true is that the confirmation of the trend reinforced Bernanke in his position of more QE.
Not a big change in yearly terms from the previous report and Nominal GDP continues growing slightly below 4%, the new is that quarterly calculation (that we think is inappropriate) became negative by inventories effect and that usually affects Markets. You can see both rate calculations in the following chart.
(click to enlarge)
Bloomberg reported it this way:
“Much of the slowing in growth was largely due to a sharp slowing in inventory investment and a drop in government purchases. Demand figures were not quite as weak as overall GDP but still sluggish. Final sales of domestic product rose 1.1 percent, following an increase of 2.4 percent in the third quarter. Final sales to domestic producers (which exclude net exports) posted a modest 1.3 percent gain after rising 1.9 percent the quarter before.”
We continue somewhere between a soft landing and a soft recovery based on a revised data that is subject to another revision or the New Normal with a Nominal GDP growth rate stable. If you want to do the math the data is in the following table from the USA BEA:
| Quarter and Year | GDP in billions of current dollars | GDP in billions of chained 2005 dollars | Real qrtrly GDP growth respect previous year | GDP Implicit Deflactor | Implicit Inflacion Rate | Real qrtrly GDP growth respect previous quarter anualized |
| 1999q1 | 9.148,6 | 10.592,1 | 86,37% | |||
| 1999q2 | 9.252,6 | 10.674,9 | 86,68% | |||
| 1999q3 | 9.405,1 | 10.810,7 | 87,00% | |||
| 1999q4 | 9.607,7 | 11.004,8 | 87,30% | |||
| 2000q1 | 9.709,5 | 11.033,6 | 4,17% | 88,00% | 1,88% | 1,05% |
| 2000q2 | 9.949,1 | 11.248,8 | 5,38% | 88,45% | 2,04% | 7,80% |
| 2000q3 | 10.017,5 | 11.258,3 | 4,14% | 88,98% | 2,28% | 0,34% |
| 2000q4 | 10.129,8 | 11.325,0 | 2,91% | 89,45% | 2,45% | 2,37% |
| 2001q1 | 10.165,1 | 11.287,8 | 2,30% | 90,05% | 2,33% | -1,31% |
| 2001q2 | 10.301,3 | 11.361,7 | 1,00% | 90,67% | 2,51% | 2,62% |
| 2001q3 | 10.305,2 | 11.330,4 | 0,64% | 90,95% | 2,22% | -1,10% |
| 2001q4 | 10.373,1 | 11.370,0 | 0,40% | 91,23% | 2,00% | 1,40% |
| 2002q1 | 10.498,7 | 11.467,1 | 1,59% | 91,55% | 1,67% | 3,42% |
| 2002q2 | 10.601,9 | 11.528,1 | 1,46% | 91,97% | 1,43% | 2,13% |
| 2002q3 | 10.701,7 | 11.586,6 | 2,26% | 92,36% | 1,55% | 2,03% |
| 2002q4 | 10.766,9 | 11.590,6 | 1,94% | 92,89% | 1,82% | 0,14% |
| 2003q1 | 10.887,4 | 11.638,9 | 1,50% | 93,54% | 2,17% | 1,67% |
| 2003q2 | 11.011,6 | 11.737,5 | 1,82% | 93,82% | 2,01% | 3,39% |
| 2003q3 | 11.255,1 | 11.930,7 | 2,97% | 94,34% | 2,14% | 6,58% |
| 2003q4 | 11.414,8 | 12.038,6 | 3,87% | 94,82% | 2,07% | 3,62% |
| 2004q1 | 11.589,9 | 12.117,9 | 4,12% | 95,64% | 2,24% | 2,63% |
| 2004q2 | 11.762,9 | 12.195,9 | 3,91% | 96,45% | 2,81% | 2,57% |
| 2004q3 | 11.936,3 | 12.286,7 | 2,98% | 97,15% | 2,98% | 2,98% |
| 2004q4 | 12.123,9 | 12.387,2 | 2,90% | 97,87% | 3,22% | 3,27% |
| 2005q1 | 12.361,8 | 12.515,0 | 3,28% | 98,78% | 3,28% | 4,13% |
| 2005q2 | 12.500,0 | 12.570,7 | 3,07% | 99,44% | 3,10% | 1,78% |
| 2005q3 | 12.728,6 | 12.670,5 | 3,12% | 100,46% | 3,41% | 3,18% |
| 2005q4 | 12.901,4 | 12.735,6 | 2,81% | 101,30% | 3,50% | 2,06% |
| 2006q1 | 13.161,4 | 12.896,4 | 3,05% | 102,05% | 3,32% | 5,05% |
| 2006q2 | 13.330,4 | 12.948,7 | 3,01% | 102,95% | 3,53% | 1,62% |
| 2006q3 | 13.432,8 | 12.950,4 | 2,21% | 103,72% | 3,25% | 0,05% |
| 2006q4 | 13.584,2 | 13.038,4 | 2,38% | 104,19% | 2,85% | 2,72% |
| 2007q1 | 13.758,5 | 13.056,1 | 1,24% | 105,38% | 3,26% | 0,54% |
| 2007q2 | 13.976,8 | 13.173,6 | 1,74% | 106,10% | 3,06% | 3,60% |
| 2007q3 | 14.126,2 | 13.269,8 | 2,47% | 106,45% | 2,63% | 2,92% |
| 2007q4 | 14.253,2 | 13.326,0 | 2,21% | 106,96% | 2,66% | 1,69% |
| 2008q1 | 14.273,9 | 13.266,8 | 1,61% | 107,59% | 2,10% | -1,78% |
| 2008q2 | 14.415,5 | 13.310,5 | 1,04% | 108,30% | 2,08% | 1,32% |
| 2008q3 | 14.395,1 | 13.186,9 | -0,62% | 109,16% | 2,54% | -3,71% |
| 2008q4 | 14.081,7 | 12.883,5 | -3,32% | 109,30% | 2,19% | -9,20% |
| 2009q1 | 13.923,4 | 12.711,0 | -4,19% | 109,54% | 1,81% | -5,36% |
| 2009q2 | 13.885,4 | 12.701,0 | -4,58% | 109,33% | 0,95% | -0,31% |
| 2009q3 | 13.952,2 | 12.746,7 | -3,34% | 109,46% | 0,27% | 1,44% |
| 2009q4 | 14.133,6 | 12.873,1 | -0,08% | 109,79% | 0,45% | 3,97% |
| 2010q1 | 14.270,3 | 12.947,6 | 1,86% | 110,22% | 0,62% | 2,31% |
| 2010q2 | 14.413,5 | 13.019,6 | 2,51% | 110,71% | 1,26% | 2,22% |
| 2010q3 | 14.576,0 | 13.103,5 | 2,80% | 111,24% | 1,63% | 2,58% |
| 2010q4 | 14.735,9 | 13.181,2 | 2,39% | 111,79% | 1,82% | 2,37% |
| 2011q1 | 14.814,9 | 13.183,8 | 1,82% | 112,37% | 1,96% | 0,08% |
| 2011q2 | 15.003,6 | 13.264,7 | 1,88% | 113,11% | 2,17% | 2,45% |
| 2011q3 | 15.163,2 | 13.306,9 | 1,55% | 113,95% | 2,44% | 1,27% |
| 2011q4 | 15.321,0 | 13.441,0 | 1,97% | 113,99% | 1,96% | 4,03% |
| 2012q1 | 15.478,3 | 13.506,4 | 2,45% | 114,60% | 1,98% | 1,95% |
| 2012q2 | 15.585,6 | 13.548,5 | 2,14% | 115,04% | 1,70% | 1,25% |
| 2012q3 | 15.811,0 | 13.652,5 | 2,60% | 115,81% | 1,63% | 3,07% |
| 2012q4 | 15.829,0 | 13.647,6 | 1,54% | 115,98% | 1,75% | -0,14% |
What we are observing is that USA economy is cooling slowly; while in the past it used to do it faster now we have a New Normal. The cycle profile is at the following chart:
(click to enlarge)
If you are bullish you will hope a repetition of the green circle above, if you are bearish at best we will face a red circle. But, what does History say? Well it says that if this parameter goes below 2% (since 1.948) there is a 67% probability of an “official” recession (two quarters of negative growth) and 83% of a quarter with negative growth in the USA in the next 12 months. As you can see in the chart below:
(click to enlarge)
What it may tell you in terms of your investment portfolio structure (not the trading one) is that any change should be in the way of reducing risk in shares not being yet, but may be soon, the moment to abandon strong positions.
I guess Bernanke must be very happy as inflation stays low and GDP rate seems to have a support ground.
© Luis Riestra Delgado 01/01/2013.
P.S. You can click the charts for a higher resolution.
Disclaimer: My commentary is just my view expressed with the sole aim of debating this topic, any investment decission you take from it is of your sole responsibility.
Related posts:
I guess Bernanke must be very happy as inflation goes down and GDP rate seems to be bottoming its down trend.
QE coming up soon? When does the current/previous came to a complete stop?