GDP = C+I+G+(X-M)

Q1 ’12 GDP was composed of personal consumption expenditures (C) totaling $11.0 trillion, private investment (I) of $2.0 trillion, government spending (G) of $3.0 trillion and net exports (E) of -$0.6 trillion. In Q2, G will be slightly lower, with E and I largely unchanged. So, overall GDP growth will be dependent on C. But…

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The China Syndrome

China’s economy must slow dramatically, here’s why. China’s growth over the last few decades has been based on huge government investment. But good projects are getting hard to find and rich countries are growing slowly, if at all. Thus exports and export-lead investment will slow. To compensate, China must boost domestic consumption, now just 35%…

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Mixed Data

Recent economic data are mixed. On one hand, the job market is doing well, bank lending is rising, and car sales are zooming. But, gasoline prices are up, real after-tax incomes are almost flat — causing consumer spending to grow a tiny inflation-adjusted 0.6% between 7/11 and 1/12 — and GDP growth is tepid. Either…

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Let’s Make a Deal!

On 1/1/13 $1.2 trillion in spending cuts commence, the $3.8 trillion Bush tax cuts end and if the 2% Social Security payroll tax holiday is extended, it too will end. Including reduced interest costs these events reduce the deficit by $6.2 trillion over a decade. Moreover, they all occur unless a bipartisan deal to stop…

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High on Hopium

Q3 GDP came in at 2.5%; best performance since Q4 ’10. But, after looking at the economic entrails the number is weaker than it looks. Consumer spending on utilities and healthcare is what drove spending, not discretionary items. Worse, spending rose only because savings rates fell from 5% to 4%. Savings is falling because personal…

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Costly Crown Celebration

Economists, those killjoys, are busy adding up the cost of the UK royal wedding, and all associated matrimonial festivities. At one end an economist thinks it will knock 1.5% or $15 billion off UK GDP as that equals one day’s work. Another says it will cost just 0.2% or $2 billion or 1/5th of a…

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China to Surpass USA in ’16

27 The IMF has determined that China’s economy will surpass ours in 2016 – in 5 years! Many have said it will happen in the mid 2020s; they are wrong. 1) The Chinese currency is massively undervalued. 2) Using Purchasing Power Parity (PPP) which measures what people spend and earn in their own currencies China…

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Jobs Half-Grow

192K jobs in Feb! But wait. Due to storms in Jan let’s avg out job growth in Jan and Feb. That gets us about 125K per month; not much better than in Q4 ’10. So we have positive job growth but no acceleration! This suggests GDP growth of 3% maybe 3.5%; half of what’s needed!…

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GDP is Back!

The US economy is improving; GDP is finally back where it was before the collapse of Lehman Bros! But by many measures the economy has a long way to go. For example, there are 130 million employed persons in the economy today the same number as in Jan 2000! That’s why we have low rates…

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