True GDP Q4 2009 – Down 15.4 %

true-gross-domestic-product-in-the-us-q4-2009

True GDP in Q4 of 2009 has dropped by 15.4% from Q3.

Obviously the recently reported 5.7% GDP growth is a complete joke, even for the regular GDP. It is so ridiculous that I expect it to be revised downward significantly at the end of February.

Even looking at the official and available data, in my calculations I don’t get anywhere near 5.7%, more like 1.5% for the official number. I don’t know where the 5.7% is coming from. Either I am missing something or they made a mistake. But that said, the officially reported GDP  is a sham anyway, so who cares …

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6 thoughts on “True GDP Q4 2009 – Down 15.4 %”

  1. Nima,

    I have a different take on the adjustments you make to GDP. I am curious your thoughts. I add to the quarterly GDP figure the federal net expenditures for the quarter, the current production cash flow of corporations and the real disposable income for individuals. Essentially, I don’t believe something that was bought with credit should be accounted for in the current period, like accounting principles that corporation technically should live by. I have used this and it acts very similar to your 30% and 50% deduction from federal and state spending on the overall number once divided by the Gold price. Why is this wrong? Why wouldn’t this be intellectually honest?

  2. Robert, your description of what you do seems rather cursory. Could you elaborate on it? It seems to make sense intuitively, but I would need some more information to process it thoroughly.

  3. Nima,

    The way I see it, in accounting during the end of a quarter at a company you need to actually have shipped the product or service and that transaction needs to have been paid for or invoiced to count for that quarter. The GDP doesn’t exactly do that with the three main areas of accounting for spending. So, for the federal government I use the quarterly net proceeds (intakes – outakes) and add that figure to the GDP number. In most recent quarters this is a negative, so it subtracts from the GDP number. If the government is spending money now, but not paying for it now then it doesn’t count as real GDP. The only way to truly assume what has not be paid for is to look at the deficit/or positive net. For states, they are supposed to not carry deficits so I make no adjustment there. Same goes for private investment, here we can ballpark this with corporate net cash flow. Lastly, for consumers we can ballpark this with real disposable income for consumers. Essentially, if people want to carry debt and over spend now, so be it, but if they are taking in less cash than they are spending then that shouldn’t be accounted for. Then, this number is divided by the price of gold to get the trends.

    I like your idea of accounting for 30% and 50% of the spending the feds and states do, but there has to be a way to account, truly account for this. I like to define variables even if it adds more, since this way I can make trades based on movements of this variables. You must have thought about how to account for this based on the fact that you make an adjustment and wondering your thoughts.

    thanks.

  4. Given the “smoke and mirrors” in nearly every number being reported out of the government I believe it is near impossible to divine the true decrease in the GDP. That said, one measure does act as a weathervane – Sales Tax Receipts, and a second measure also gives insight but to a lessor extent – Income Tax Receipts. The following numbers were obtained from the U.S. Bureau of Labor Statistics ( http://www.bls.gov/eag/eag.ca.htm ). From Aug 2009 – Dec 2009 a net loss in payroll employment of 766,000 jobs was reported. BLS reported the average hour wage at 22.45, and an average work week of 33 hours. This equates to an annual wage loss of approximatley 30 billion. California with a statewide sales tax rate of over 8% just reported that sales tax receipts that are $327 million under the state’s already reduced estimate. Clearly this is not an improvement, a “good sign”, a “green shoot”, or any of the other sound bite measure that are being tossed around by the news media. The State of California reported that due to actual receipts that are significant under estimated receipts (which were already reduced) , that California has a $20 billion budget deficit, and that the deficit is growing each month. Clearly , this is not a sign of improvement.

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