Rates continue dropping toward record lows for the third week after a weak GDP report today, summarized below.
– 1Q2013 GDP was +2.5%. This is seasonally adjusted, inflation adjusted and annualized.
– This is weak for how far we are into a recovery and, worse yet, because this follows an utterly miserable 4Q2012 GDP growth of 0.4% again seasonally adjusted, inflation adjusted and annualized.
Looking inside the full report:
Real final sales of domestic products increased 1.5% in the first quarter, compared with an increase of 1.9% in the fourth. This number is the core of GDP. Ultimately GDP is driven by Consumer Spending on domestic goods and services. If Keynesian deficit spending had any validity, then it is this number which should be increasing. Real final sales of domestic products eliminates Government Spending, changes in business inventories, and imports and exports. It is this consumer spending of domestic goods and services which creates jobs.
2.5% headline with 1.5% final sales of domestic products is simply miserable at this time and gives little hope that the debt/GDP ratio will be flat any time soon.
What should GDP be? We should be striving for growth of 4% and occasionally accept 3.5% as “OK.”
This is the first of three 1Q2013 GDP reports. The second estimate will be May 30.
Consumer Sentiment (April 2013)
– University of Michigan Consumer Sentiment 75.4 up from 72.3.
– This is supposed to measure consumers intentions about spending.