GDP Revision, Prices, Fed Reserve, and the Blues

June 26th, 2013 at 11:53 am

There’s a great old blues song about how some guy or gal steps out on their partner just before said partner scores big–here’s the great BB King’s version of Might Have Made Your Move too Soon.

I thought of that song this AM when we learned that GDP growth was significantly revised down for the first quarter, from 2.4% to 1.8%.   From BEA:

The downward revision to the percent change in real GDP primarily reflected downward revisions to personal consumption expenditures, to exports, and to nonresidential fixed investment that were partly offset by a downward revision to imports.

The percent changes just noted are annualized quaters and OTE’ers know I like to smooth out some statistical noise by looking at year-over-year changes.  That’s what the figure below shows for real GDP and for the core price index (PCE) that the Fed apparently weights heavily in their assessment of price pressures.  I see deceleration.

Now, I’m a simple guy.  I see trends like this and once again scratch the aging head, wondering why the central bank would start talking about reeling in their stimulus, especially given that they’re the only game in town, what with Congress off in la-la-land.  Ben and co. are deeper than me…they’re looking ahead, peering around corners, fretting about well-anchored inflation and asset bubbles.  And as I’ve stressed, their first move isn’t taking away the punch bowl; it’s reducing the size of the ladle.

Still, all that said, it may be the case that the Fed chair and the bluesman don’t just share the same initials.  BB might have made his move too soon.

gdp_pce

Source: BEA

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4 comments in reply to "GDP Revision, Prices, Fed Reserve, and the Blues"

  1. rjs says:

    it is much worse than it looks, and that was evident before the revision; check the breakdown of inventories in table 2:

    http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp1q13_3rd.pdf

    that, my friend, is an aberration of the seasonal adjustment process, and without it GDP would have grown at an annual rate of less than 1%…


  2. Peter K. says:

    Could it be that Bernanke is trying to “talk up” the economy like when he was smoking “green shoots”? Like “Recovery Summer”?

    Maybe he’s doing a little tough talk before leaving office and returning to the private sector?

    Bad news on the economy but good news elsewhere. Markey win Senate seat. It’s not 2010 anymore. And the Supreme Court on gay marriage. Heroic Texas state senator performs an epic filibuster over restrictive abortion bill. Maybe everyone doesn’t agree on these issues, but I had a good day!


  3. Fasaha Traylor says:

    Amazing how the blues introduced the world to short, succinct, principled writing before blogs’ mamas were born!

    One of my favorite BB King pieces, and never thought to apply it Ben Bernanke. You gonna send him the link?!?


  4. purple says:

    I think he’s concerned about bubbles in the bond market, the carry trade, EM stocks, and wants to puncture it. It’s not dissimilar from what the PBOC is doing right now in the interbank lending market. There are some dangerous asset bubbles blowing up now because money isn’t trickling into the productive sector.


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