May 25, 2006
Good News— But How Good?
Economy dashes ahead at 5.3 percent pace
Emerging from a year-end rut, the economy dashed ahead in the opening quarter of this year at a 5.3 percent pace, the fastest in 2 1/2 years and even stronger than previously thought.
The new snapshot showed gross domestic product during the January-to-March period exceeded the 4.8 percent annual rate initially estimated a month ago, the Commerce Department reported Thursday.
Gross domestic product measures the value of all goods and services produced within the United States and is considered the best barometer of the country’s economic fitness.
The upgraded reading on GDP, based on more complete information, mostly reflected stronger U.S. exports and better inventory building by businesses.
5.3 percent is absolutely blazing…
But considering the inflation talk I’m hearing from the hardcore gold-standard folks, I worry a little bit about what this number means. For those of you economics folks who read this blog regularly (i.e. Perry or Uncle Jack), can you answer a question?
Does inflation factor into this number? If so, how prominently? Elsewhere in the article, they were discussing a 2% rise in core consumer prices, following a 2.4% increase in Q4′05… Either way you look at it, 5.3% reported GDP growth indicates a humming economy, even if that number is masking some inflation. But I would hope to know just how much REAL growth is really there, if inflation is being counted.
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For some people like me, growth only means that I would probably keep my job. What is the meaning of a “2% rise in core consumer prices,” when my last winter’s heating cost (natural gas) inceased over 30% than the previous year.
Brad, take a look at today’s PCE number released at 8:30a.m., and watch the reaction. If it comes in higher than most expect, the fear is that the Fed will raise rates again. If it comes in on target, perhaps they pause.
All the financial television cheerleaders are too caught up in the “core inflation” number as VRB stated. The Fed is caught like Alice in Wonderland. They have to keep printing money just to stay in place, and at an ever faster rate. The whole system is ripe for another big fat failure.
So, that GDP number from the other day, it doesn’t mean butkus. We’re always growing at some sustainable rate until we’re not, and even then it’s not as bad as people think. Even when unemployment is 10%, there’s still 9 out of every 10 people working. If you can’t be 1 of 9, then you better have a backup plan with a lot of cash reserves on hand.