Well, it appears I was wrong about the economy – at first glance. At a deeper look, I think I’m dead on.
<a href=” http://bea.gov/bea/dn/home/gdp.htm”>Here</a> is the link. Up front, a 3.5% increase in GDP. In the details, however, three things stand out.
First, Personal Consumption Expenditures was essentially flat. Oh, yes, it increased 4.4% in real terms. It was up less than 1 percent before adjustments, however. Somehow this quadrupled. snicker. (Yes, I know how. But the prices did NOT go down this last quarter for anything but gasoline.)
Second, Private Domestic was negative. Quite simply, the popping (slow-motion, really) of the housing bubble is quite evident here.
Third, the import-export ratio improved (from our point of view) drastically. It’s been trending to a larger and larger negative for several years, but this quarter it returned to a value similar to that of a year and a half ago. There’s one big reason for this – the price of oil. Not gasoline, oil. We slightly increased the amount we imported but got a savings (compared to the previous quarter) of almost 35%.
Whether oil was overpriced before or underpriced now, the price of oil is the dominant reason we aren’t ‘apparently’ in a recession.
What this means is that for most of the people, we have indeed been in a recession. It’s just masked by cheap oil — cheap oil which did NOT result in people being enthusiastic in their PCE or PDI. I’ll be validated on this come next quarter.
Next quarter? Yep. Housing isn’t going to recover – or even flatten its decline – over the next three months. But oil prices aren’t going to drop – and certainly not another 35%. And without that magic on the net exports line, the decline in GDP is going to be obvious to everyone.