Thursday, January 28, 2010

Durable Goods / GDP Expectations

Posting has been very light the past few days as "the real job beckoned", but getting pumped for tomorrow's GDP release (yes, I get "pumped" for economic releases).

Unfortunately, I haven't had the time to properly break down the components much, so this is purely going out on a limb based on how things seem to be playing out.

I expect a blowout headline figure (expectations are for 4.7%). Lets call it 5.3%.

Does that mean I believe things are improving at a level that rate would indicate? Of course not (though if that is the figure, CNBC talking heads' heads may explode).

My predictions as to the drivers of the print...

  • More downward revisions to past quarterly figures, thus my predicted GDP level is not in actuality 5.3% higher than the current (i.e. as of today) Q3 '09 print
  • Stimulus induced sectors (think real estate, though autos will be interesting post CFC) making up the majority of the increase with the exception of...
  • The MASSIVE impact from the inventory rebuild, which I suspect will be revised down in coming quarters as it is realized that the inventory rebuild wasn't all real
  • A VERY low (potentially comically low) GDP deflator, thus nominal GDP won't be nearly as impressive on a relative basis as real GDP
To shift gears from pretend (i.e. my prediction) to fact, lets take a look at today's durable goods release. Durable goods orders were improved, but below expectations and led once again by the war machine.

Month over Month Change

Putting December '09 into longer term perspective...

Unfortunately, longer term there has not been much (any?) strength outside of the war machine.

Source: Census

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