GDP Grew By 3.2%

Source: Econobrowser

BEA, All the Way! Good news, right? Well, the stock market certainly doesn't think so.

And I don't really think so either.

To the casual observer, the 3.2% quarterly increase, when compared with the last quarter-over-quarter increase of 5.6% may look like things are getting worse.

But we can just expect regression towards the mean, the economy is still growing. The 3.2% increase is on top of last quarters 5.6% increase, so we are kicking ass over last year still.

What I am concerned about is:

1. Inventory adjustment took a dive. A major dive. I was wishing for another quarter at least of unsustainable inventory adjustment. Although it still accounted for about 1/2 the GDP growth, it was still not enough. I knew it was going to end, but I didn't get my GDP fix yet. So this may mean less demand for industrial warehouse demand in the short term. We were foolish to count on it in the first place, but now that it has come and gone I am still feeling a little empty.

2. Exports slowed. What happens when the facts conspire against the narrative I was crafting? I have a speech coming up in a month on how exports were going to change the course of the nation, save the world, redevelop the supply chain. And now my job got that much harder.

3. Consumer Spending Increased: Why is this bad? You need consumer spending for imports and consumption makes up the majority of GDP anyway. Because unemployment remains high, real disposable income was unchanged after rising last quarter by 1% and where did the extra consumer spending come from? Savings declined from 3.9% last quarter to 3.1% this quarter, and decreased savings will lead to decreased investment down the road. So, who cares? Well, what did consumers buy hot-shot? Durable goods, things they put off buying when they didn't have any money. Do you know the reason why they are called durable goods? Because once you buy them, you don't need them for 5-7 years, so you can expect consumer spending to decrease in future quarters.

So, these numbers are likely to get revised, but the one takeaway is that we are probably out of the recession. The bad news is that things are not snapping right back to where they were and many of the same problems are still here, high unemployment, sluggish business investment, and a tapering off of export growth.

In many ways it feels like we are still trying to find a way out, hunting and pecking without some other bubble, be it exports, green tech etc. for everyone to rally behind.