First Quarter GDP
Stocks soared today on the GDP news (see below), and the FED saying the economic fall was slowing down.
Bonds hit recent high interest rates (lower value) – and this is a cause for concern.
The Dollar is struggling against other currencies right now, but the important $1.34 level with the Euro withstood the test, and if that holds, the Dollar should strengthen in the near term.
Oil, gasoline and gold all went sideways.
In the news today…..
1st Q GDP – fell 6.1% on an annual basis. This was far worse than the consensus estimate of GDP of a 4.7% drop. The 4th Q 2008 GDP fell 6.3% on an annual basis – so the first Q 09 is pretty bad – in fact it’s just as bad as the 4th Q 08.
So, why did stocks go up on the news. The devil is in the detail of course. GDP is comprised of various components, like consumer spending, industrial production, exports and government spending. Here are some details:
- Inventories were down $104B. This was considered outstanding news, as factories MUST (the unwashed thought) start producing to meet future demand. I can remember the 1980’s recession where the same thought was voiced, but, in fact, manufacturers found ways of keeping production very low – to avoid risk and to reduce cost. Could they be doing the same thing now?
- Exports were down 30% from a year ago. This is a DRAMATIC fall in exports – and has negative repercussions for our economy.
- Consumer spending wasn’t down as much as stock buyers thought it should be – so this was GREAT news for stocks as consumers are actually spending away – remember that consumers account for about 70% of GDP.
This GDP calculation is a preliminary calculation and will be revised twice in the future. Consumer spending numbers have been down significantly, and I would expect a downward adjustment in future GDP calculations to account for more accurate data.
Metro Jobless Rates – were down again. The biggest losers in jobs were Elkart, IN at 18.8% jobless and Bend, OR at 17% jobless. 18 Metro Areas have jobless rates greater than 15%, and 15 Metro Areas have jobless rates less than 5%. This starts to show the distribution of joblessness across the USA. Some areas are now experiencing jobless rates which are the same as during the Great Depression.
Here are the last numbers for today:
Dow Jones 30 Industrial – 8186 (up 169 points)
10 Year Treasury Bond – 3.10% (up 0.09%)
Euro – $1.3265
Gold – $901 (up $7)
Oil – $50.89 (up $1.05)
Gasoline – $1.45 (up $0.05)
