Thursday, October 29, 2009

GDP rises, as America's credit card cash advance kicked in!

Ricky - "Hey, I just added $250,000 to my bank account this month, how cool is that?"
Bonnie - "Nice job. But didn't that come from a federal student loan?"
Ricky - "Yeah, why?"

That's how a cynic could read this GDP report, which (in its defense) points out where and how the government pumped up industries artificially. By all means, I want to see GDP return to growth and a recovering economy.

Note that GDP reporting is usually sequential, as in this September quarter compared to the June 2009 quarter. In most company analysis, results are compared to the year-ago period, so as to adjust for seasonal differences. (You wouldn't compare GapKids' back to school results with, say July numbers, right?) When looked at against last year's 3rd quarter, GDP actually declined 2.2%.

I hope that "actual" growth revives soon. But with unemployment continuing to rise and businesses saying that "real" economic activity is still very slow, I do not buy the argument that we're on the cusp of a recovery.

A recession is typically described as "a decline in GDP for two or more consecutive quarters." So then it IS accurate to call this the end of the recession. The issue is, what other recessions have been ended by similar government involvement, and is this improvement sustainable without free money for cars and houses?

The full report. Worth perusing, especially for the industry detail.


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