Saturday, May 07, 2011

Anemic GDP Statistics: This Is "Recovery?"

John Crudele has a scathing column in Tuesdays NY Post, which has information not widely reported. "The government said the GDP in the first quarter grew at an "annualized" rate of 1.8 percent. That means you have to divide the 1.8 percent annualized rate by four quarters to see how much the economy really grew in the first three months of the year. The answer? A puny 0.45 percent."


He goes further:


"The problem is, the economy wasn't just slow in the first quarter. The last three months of 2010 were worse if you know how to read the figures.


Here's what you have to understand for any of this to make sense. The GDP numbers reported by theCommerce Department are derived after inflation is deducted from overall output. So, that 1.8 percent annualized first quarter growth was what was left after inflation of 1.9 percent was removed. (Yes, inflation is probably worse than 1.9 percent but that's for another column.)


The much better 3.1 percent annualized growth in the last quarter of 2010 was, at best, a fluke and, at worst, a hoax.


The Commerce Department was only able to come up with the 3.1 percent growth because it claimed there was virtually no inflation in the last three months of 2010. If inflation back then had been reported at 1.9 percent (just like the first quarter) economic growth would have dropped from an annualized 3.1 percent to just 1.2 percent."


Crudele is pessimistic, but my only complaint is that he wrote "virtually no inflation," instead of providing a figure. As a regular reader of Mr. Crudele, I didn't check his numbers, but if they stand, it's bad news for President Obama, more than for the GOP. The economy will be the determining issue in the 2012 elections, and a sitting president gets the responsibility for it, period.


Government stats are revised, as later data come in, but they are also adjusted in ways that are often flawed, before being released. Crudele examines the bureaucratic rules of the "stats" game, with a critical eye. He also informs us that Yanks-Red Sox tickets are selling cheap, in the first half of this column. What can I say? Even Crudele put this story in the second half of his column, and he's in the Post's business pages.


I think this is an "under the radar" story that will be a part of the campaign of whoever runs against Obama. It's not widely reported now because of other events in the news, perhaps, but I doubt many media outlets will continue mentioning this after the "death of Osama Bin Laden" stops dominating the headlines.


There's a long time until next year's elections, and plenty of time for the economic and political situation to change. Still, if you look at the real numbers, on the ground, everything is costing more, and neither the job creation, or the economy as a whole is keeping up with inflation. $4.00 a gallon for gas slows down the economy, however they figure it in the Consumer Price Index. We had a name for this in the '70's: Stagflation. Soon we'll revisit "the misery index," perhaps. If the media treated Obama as they did Carter, we would've, already.