GDP Disappoints

Professional analysts don't seem to be very good.
Take yesterday's EIA report on US oil stockpiles. (It's a big report that swings oil prices because it surveys and reports supplies of various oil products, which in turn provides visibility to demand.) On every metric analysts were completely wrong. Instead of supplies being up 400,000 barrels, they were down 1.4M barrels. And so on.

The analysts are at it again with the GDP. Instead of the report being 2.3% growth, it came in at 1.9%.
http://biz.yahoo.com/cnnm/080731/073108_gdp.html

To be honest, it doesn't really matter. The government bought the GDP growth with $130B in stimulus checks. Literally.

* Q2 GDP of $12.3T, of which $8.6T was personal consumption

* $130B in stimulus checks = 1.9% of $8.6T.

It's really that straightforward.

And what it means is that GDP was actually 0% without the food stamps... I mean stimulus checks.

Reading the report is pretty sobering.
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
1. Inflation was 4.2%
2. Imports are down 6% - and that's after the rapid rise in oil prices. That means consumer spending is way down
3. The auto industry's deperession drove out 1% of GDP
4. Inventories shrunk a whopping $62B (they shrank $10B the previous quarter)

But there are some bright spots as well
1. Exports are up 9%
2. Housing construction related spending is still shrinking but at a slower rate. I won't say bottom, but it's there in 2 or 3 quarters.

Of the 1.9% growth
* 1% was consumer spending
- 0.54% food and clothing
- 0.41% medical


* Government spending. Up 6.7% vs 5.8% in the first quarter. This is largely from raises that went into place at the beginning of the year, as well as heavy defense spending increases

At the same time, GDP was revised downwards as follows:
Q4 2007 GDP -0.6%
Q1 2008 GDP 0.9%

I'll do a separate, more comprehensive GDP review, but the message is very clear: consumers and businesses are cutting way back.