1 Comment

Q2 GDP Smoke & Mirrors Show & This Is Not a Recovery

Analysts’ projections had been all over the place from 3-4-5% down to negative 3-4-5%. And you may ask how can there be such a wide range? Although empirically most have an intuitive sense, no on can tell what the announced number will be bubbling out of the alchemists’ cauldron of statistics.

First one must remember that the formula used to arrive at the GDP number has been changed so going forward the numbers are higher than they would have been using the traditional method.

The Government “Revises” 84 Years Of Economic History This Week

Awaiting the latest “Big Number” to be announced, that is Q2 GDP this story on CNBC.com is quite telling of our current state of affairs.

GDP views range from recovery to—gasp!—recession

“It may take a while before investors get a clear picture on just how well—or poorly—the U.S. economy is performing.”

“As Wall Street awaits Wednesday’s reading on gross domestic product in the second quarter, two things are becoming clear: Growth is a good deal short of where most economists had expected it to be by now, and even a particularly strong showing over the past three months probably came in large part because the period before it was so bad.”

“As in the last several years, the herd is likely to be disappointed,” A. Gary Shilling wrote in a post on his firm’s website.

“He believes weak consumer spending combined with low levels of residential construction and exports will hold back second-quarter GDP—and possibly even indicate the U.S. is in recession.”

• source: CNBC.com

The fact of the matter is, if you’ve been paying attention at all and you have some cognitive abilities of your own, you’ve been able to see through the smoke and mirrors of this Recovery Illusion being fed to you by the MainStream Media.

All of the numbers used to create this illusion have been massaged and manipulated to look much rosier than their realities. Before we even tackle the free money from the Fed being used for stock buy-backs to create phony Earnings-Per-Share numbers and inflated stock prices, let’s just stick to addressing the much anticipated GDP.

The initial number is always revised without fail. Which always puzzles me. Why not wait until all the necessary data is compiled then publish a concrete number?

Remember, Q1 was first announced to be around 0.1% and after several revisions, settled in at -2.9%.

 Q2 GDP Surges 4%, Beats Estimates Driven By Inventories, Fixed Investment Spike; Historical Data Revised

The Commerce department reported Q2 GDP which blew estimates out of the water, printing at 4.0%, above the declining 3.0% consensus, as a result of a surge in Inventories and Fixed Investment, both of which added over 2.5% of the total print, while exports added another 1.23% to the GDP number. The full breakdown by component is shown below.

“The Bureau emphasized that the second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency. The “second” estimate for the second quarter, based on more complete data, will be released on August 28, 2014.”

Q2 GDP snapshot

Speaking of revisions, today the BEA also released its annual revision of all data from 1999 to Q1 2014, which made last quarter’s “harsh weather” -2.9% print a more palatable -2.1%, in the process throwing everyone’s trendline calculations off as yet another GDP redefinition was implemented.

• source: zerohedge.com

..…so, remember the scene in the film 1984, when the Ministry of Truth is clipping the old news, dropping it into the furnace and re-posting their new version………

GDP Deja Vu Stunner: Over Half Of US Growth In The Past Year Is From Inventory Accumulation

Back in December 2013, when everyone was expecting a 3% GDP print for Q1, we did a simple analysis concluding that “Inventory Hoarding Accounts For Nearly 60% Of GDP Increase In Past Year.” We stated that this “hollow growth”, which is merely producers pulling demand from the future courtesy of cheap credit and assuming the inventory will be sold off in ordinary course of business without bottom-line slamming liquidations or dumping, and which further assumes a healthy US consumer and global economy, is a flashing red flag for the future of US economic growth. In fact, we were one of the very few who warned that Q1 GDP would be a disaster: “The problem with inventory hoarding, however, is that at some point it will have to be “unhoarded.” Which is why expect many downward revisions to future GDP as this inventory overhang has to be destocked.

This is precisely what happened in Q1, however it was blamed on the “harsh weather.”

Alas, following today’s “spectacular” 4.0% GDP print following the predicted plunge in the US economy in Q1, we can again conclude that not only has nothing changed, but what we warned in Q4 of 2013 is about to happen all over again, and the inventory overhang (which incidentally was estiamted by the BEA and will certainly be revised lower next month) is about to slam future US growth.

• source: zerohedge.com

Interview: John Williams of Shadowstats.com on USAwatchdog with Greg Hunter

In the following interview, (posted July 13, 2014) economist John Williams of Shadowstats.com presents raw data on the economy. He points out:

  • How the government’s accounting gimmicks result in rosier numbers
  • How understated inflation factors boost GDP numbers
  • How the Fed’s QE has no impact on the real economy but rather acts as a backdoor bailout for bank insolvency
  • and much more

• source: USAwatchdog.com

It does not feel like a 4% economy: CEO

From the standpoint of Aetna, the U.S. economy does not feel like it’s growing as quickly as the government reported on Wednesday, Aetna Chairman and CEO Mark Bertolini said.

• source: CNBC.com

CEO Of Europe’s Largest Insurer Pops The Utopia Bubble: “Nothing Is Solved And Everybody Knows It”

It’s one thing for a tinfoil fringe blog to repeat, month after month, that nothing in Europe(or US) has been fixed, that Draghi’s(the Fed’s) disastrous policies are merely concentraing and stockpiling even more unresolved problems – for now ignored courtesy of the gentle sprinkle of ZIRP, or rather NIRP “fairy dust” – and that just like Portugal showed panic can grip the entire continent literally overnight because everyone knows this. It is something entirely different for the CEO of Europe’s largest insurer to make the same statement.

…the same could be said of the Fed and the US

From Bloomberg:

When asking Allianz SE’s chief investment officer about the euro area’s sovereign debt woes, be prepared for an emphatic response.

The fundamental problems are not solved and everybody knows it,” Maximilian Zimmerer said at Bloomberg LP’s London office. The “euro crisis is not over,” he said.

While extraordinary stimulus from the European Central Bank has encouraged investors to pile into the region’s government bonds this year, that’s not a sufficient remedy for Zimmerer, who oversees 556 billion euros ($757 billion) at Europe’s largest insurer. Countries are still building up their debt piles, and that’s storing up trouble for the future, he said.

Here’s the punchline: everyone knows that Draghi, the unelected dictators of Europe, and all of its bankers are lying when the say day after day that things are better. However, at least there was unanimity in the “head-in-the-sand” exercise, which recall from game theory works only if all participants in the charade agree to the ignore reality.

Today for the first time, a “member of the club” finally called out Europe on its bullshit.

• source: zerohedge.com

The Deteriorating Economic Outlook

John Williams (www.shadowstats.com) provides inflation estimates based on previous official methodology when the Consumer Price Index still represented the cost of a constant standard of living. The 1.26% inflation measure used to deflate first quarter nominal GDP is unrealistic, as Americans who make purchases are aware.

A reasonable correction to the understated deflator gives a much higher first quarter contraction. The two main causes of inflation’s understatement are the substitution principle introduced during the Clinton regime and the hedonic adjustments ongoing since the 1980s that redefine price rises as quality improvements. Correcting for excessive hedonic adjustments gives a first quarter real GDP contraction of 5%. Correcting for hedonic and substitution adjustments gives a first quarter real GDP contraction of 8.5%.

• source: PaulCraigRoberts.org

THIS IS NOT A RECOVERY

US job cuts soar, thanks to tech layoffs: Challenger

U.S. employers planned to cut nearly 50,000 positions in July, Challenger, Gray & Christmas reported Thursday, meting out 50 percent more job cuts than in the prior month.

The global outplacement firm said in its monthly layoff report that planned payroll reductions hit 46,887, the second highest level of the year. That compares with June’s 31,434 cuts, which were the fewest of 2014. The firm added that massive staff reductions by Hewlett-Packard and Microsoft helped inflate this month’s figure.

• source: CNBC.com

MW-CO467_tech_j_20140728113034_MG

Tech job cuts reflect declining computer sales

Technology companies have been slashing jobs at a more rapid pace than they have in years. According to data released Monday by outplacement firm Challenger, Gray & Christmas, job cuts in the tech sector for the first half of 2014, which totaled more than 48,000, were up 68% compared with the same period last year. What’s more, this six-month job-cut total nearly surpassed the 56,918 planned cuts announced in all of 2013 — and that’s before you even factor in the 18,000 job cuts announced by Microsoft in July.

• source: marketwatch.com

Microsoft Eliminating 18,000 Jobs as Nadella Streamlines

Apple to lay off about 200 people at Beats: Bloomberg

J.P. Morgan cutting hundreds of tech-support jobs

J.P. Morgan Chase & Co. is cutting hundreds of technology-support employees in its corporate and investment bank as part of an overall push to trim expenses as the bank battles sluggish revenue, a person familiar with the matter said.

• source: marketwatch.com

More NY Companies Announce Layoffs, Two Leave for Other States

Tyson Foods Closing 3 Plants in Iowa, NY, NM-950 Jobs Lost

Merck lays off 600 more employees at North Wales, Lansdale offices

Dick’s Sporting Goods lays off 478 PGA golf pros

Kellogg to shut down snacks plant in Georgia, cut 325 jobs

Chart Of The Day: For Caterpillar The “Great Recovery” Is Just As Bad As The Great Financial Crisis

Starting in December 2012 and continuing through today, Caterpiller has reported 19 consecutive months of declining global year-over-year retail sales.

New Home Sales Collapse 20% From May To Dec 2012 Levels; Biggest Miss In A Year

Pending Home Sales Tumble From Recovery Highs, Biggest Miss In 2014

Case-Shiller Home Prices Tumble Most Since Dec 2011, Miss 2nd Month In A Row

Study: 35 Percent of Americans Facing Debt Collectors

Deadbeat Nation: A Shocking 77 Million Americans Face Debt Collectors

The Typical Household, Now Worth a Third Less

 

Please share this, pass it along, comment and start a conversation.

FeatureImg.Q2-GDP

Advertisements

One comment on “Q2 GDP Smoke & Mirrors Show & This Is Not a Recovery

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: