I no longer believe the government GDP statistics, of course, because the numbers are only loosely based on reality. I do believe that the first quarter of this year was disastrous, economically. I don't believe the people who are claiming it was the weather, because we have winter every year, and though some are more severe than others only an ice age would be enough to cause a 2.9% drop in GDP.
Especially in a government statistic which is massaged to be as favorable to the sitting government as possible.
"...[T]hese guys continue claiming that the first-draft estimates for a single month (March) are where the real story is." "These guys" being the press, of course; they're trying to spin it and protect their little (d) in the White House from the consequences of his economic policies.
Last night I saw the figure -1.4% and -2% bandied about, and the conclusion I read was that if the figure was revised down to -1.4% instead of -1.8% or -2% the press would be able to crow about how much the economy has improved. I expect a lot of people on that side of the aisle are shitting their pants over this, because it's just plain bad.
Denninger sometimes posts a chart which shows a few statistics, and then a synthesis of them. This chart shows GDP, the US federal deficit, and then shows GDP minus the money borrowed by the federal government. He argues--correctly, I think--that if you are adding government expenditures to GDP, you must subtract the money they borrow from that figure since that borrowed money is a liability that counts against future productivity.
That number--GDP ex government debt--has been consistently negative.
The argument that government expenditures are a positive influence on productivity is an entirely separate issue, of course, since government cannot create wealth; it can only consume it. The decision to switch to GDP rather than GNP was informed by Keynesian economics, which themselves are faulty (particularly in their implementation).
The second quarter is coming to an end, and when the initial numbers are published they'll be positive and the press will crow about how greatly improved the economy is now that it's no longer winter. The real story will be how far down those initial figures are revised by September, because it's becoming increasingly obvious that while the statistics are not numbers to have much confidence in, the initial numbers are total garbage. The initial numbers for first quarter of this year were positive; I seem to recall the first estimate being about 1%. How do you get to -2.9% from a positive number unless you're making shit up? -2.9% is nearly four hundred percent lower than their initial estimate--it's not even in the same county much less being in the ballpark.
We're not in an economic expansion. The economy has not been growing; it's been contracting and it's been doing so ever since 2007. If GDP and inflation were being figured and reported honestly, they would show that we've been in a depression and that prices (on food and energy) have risen precipitously.
Plenty of people whose opinions I respect say that we're in a deflationary cycle--but if that's so, why does a pound of bacon now cost three times what it cost 18 months ago? No prices are lower now than they were last year and it's only a question of how much the price has risen. You can call it "deflation" when wage growth is faster than inflation, but wage growth is stagnant and our politicians are falling all over themselves in an incontinent attempt to find a way to give amnesty to another fifty million illegal aliens (which will further depress wages) without getting themselves voted out of office. Unemployment remains staggeringly high (when you count it using methods which don't exclude most of the able unemployed population) and taxation is confiscatory.
Ultimately we're going to have to do something to fix this, something that doesn't involve wishful thinking and unicorn flatus. Ideally it would include an energy policy that pays attention to the laws of physics and acknowledges that if we want to have a robust economy, it's going to mean some people will have to live near refineries or nuclear power plants. It also means the immigration laws will have to be enforced, and our government will have to make do with less money.
But all of that is too hard for our politicians. Expect this to go on for a while...until it can't.