GDP: MORE BLATHER

John William's Shadowstats is a service not for bunker dwelling nuts, but rather for fortune 500 companies who subscribe in order to assess the facts behind the absurd government numbers. His major point (below) is that 70 percent of the GDP number (+2.5%) was supposedly from real growth in consumer spending, while consumer balance sheets, income, and sentiment (see chart above) are clearly deteriorating.

So what gives? Is our government simply lying to us - or are the numbers that they use hopelessly skewed to produce unrealistic results? Is there a difference?

Here are some excerpts from Shadowstats:

"Opening Comments and Executive Summary. The U.S. economy is sinking anew, not rebounding. Such is contrary to the media hype around this morning’s (October 27th) headline 2.5% second-quarter GDP growth, which was up from the 1.3% growth estimate of the first-quarter. Officially the broadest measure of U.S. economic activity published by the U.S. government, the widely-followed gross domestic product (GDP) nonetheless remains the most-heavily-biased, the most-heavily-guessed-at, the most-heavily politicized and the most-worthless major indicator of domestic business activity. Today’s numbers out of the Bureau of Economic Analysis are outright nonsense.

Consider that latest numbers showed that the level of inflation-adjusted third-quarter 2011 GDP broke above the pre-recession high of fourth-quarter 2007: a full recovery. That is absurd. No other major economic indicator, including payrolls, real (inflation-adjusted) retail sales, industrial production, trade deficit or housing starts is showing that. The GDP previously had been reported as breaking above its pre-recession high in fourth-quarter 2010, but that happy news revised away with July 2011’s benchmark revisions to the GDP series. Downside revisions also should erase today’s nonsensical news, eventually.

Consider that personal consumption contributed 1.72%, or 70%, of the annualized real 2.46% quarterly growth rate attributed to third-quarter GDP. Yet, consumer liquidity problems intensified in the third-quarter, with real disposable income (effectively inflation-adjusted take-home pay) falling at an annualized pace of 1.73%. Year-to-date, since fourth-quarter 2010, real disposable income has been flat (up 0.02%), while real personal consumption has gained 1.3%, which accounted for more than the total 1.0% growth in real GDP in the same period."