Gross domestic product expanded at a 2.5% annual rate in the first quarter, up from the barely positive 0.4% in Q4 2012, but missing expectations of 3.2%.
In the report we saw that American businesses restocked warehouses shelves at an increasing pace and consumer spending posted the biggest gain in more than two years (I personally attribute these increases to Hurricane Sandy).
Government spending was the big drag again. The drop in military outlays over the last 6 m belowonths is the most we have seen in 60 years. The government report also showed an increase in imports (prices) due in part to a jump in oil and nat gas prices.
I don’t think it was too much of a surprise that this report missed the mark. Sure the Q1 readings looked better than the fourth quarter, but the real demand for U.S.-made goods and services actually looked weaker in the most recent report.
Given the trends we are seeing in broad data, I don’t expect a big turnaround in GDP, in fact, I think GDP will slowly deteriorate over the course of the year.
How do you use GDP?
GDP is a far reaching report that is supposed to reflect the value of all goods and services produced in the states. It’s highly subject to revision and some argue that its standard deviation of error makes it less effective than other data. Remember that this is only the initial reading for Q1.
The bottom line is that it’s been used for a long time and is our best “single gauge” of output (or is it?).
I thought I’d have a little fun and dig into the minds of our experts and readers alike to see what they think about the GDP reports and if they have an alternative method. I think it will be interesting to see how we all use this data.
So the question is:
How much credence do you place in the GDP report?
If you use other sources to measure economic growth, what are they?
1. I trust the final GDP reports with over 90% accuracy
2. I use the GDP report as general reading on the economy, but I used other data to back it up
3. I don’t trust the GDP report much at all, too manipulatable and the margin of error too high
4. The final GDP reading is a good rough guesstimate, but other data must be supporting of the trends
5. Other – Please explain
For me, I probably would go with #4. I don’t completely discount the data, but if it’s running counter to what the majority of other (perhaps more accurate) data sets are telling me, and then I simply reduce the credence of the GDP reading and go with the trends in my main data sets.
I also DON’T use GDP trends and predictors; to me they are simply outcomes or verifications of what I am finding in data sets like durable goods, home sales, industrial production, factory orders, etc.
GDP is nice because it puts a little bow on the big data package and expresses it in percentage change, other than that, it’s actually one of the last things I look at.
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