Posts Tagged ‘economic analysis’
The U.S. economy, as measured by gross domestic product (GDP), contracted in the fourth quarter of 2012 for the first time in three and a half years. According to the Bureau of Economic Analysis, U.S. GDP “unexpectedly” declined 0.1% in the fourth quarter of 2012 from the third quarter. (Source: Bureau of Economic Analysis, January 30, 2013.) Economists were estimating growth of one percent in the GDP for the fourth quarter of 2012.
If the first quarter of 2013 proves to be weak for GDP again, the U.S. will have technically entered a recession once more.
What’s behind the contraction in GDP? Defense spending took the biggest cut in 40 years. (Source: Associated Press, January 30, 2013.) But there are other troubles brewing.
Sure, government spending declined. In the fourth quarter of 2012, federal government spending declined 15% in the U.S. economy compared to an increase of 9.5% in the third quarter. Defense spending decreased 22.2% in the fourth quarter, compared to the 12.9% increase in the third quarter of 2012.
Looking deeper into the Bureau’s report, we discover:
• Exports of goods and services adjusted for price change from the U.S. economy fell 5.7% in the fourth quarter. In the third quarter of 2012, exports rose 1.7%.
• In the last quarter of 2012, businesses in the U.S. economy produced less than they did in third quarter of 2012. Inventories increased only by $20.0 billion in the fourth quarter, compared to a $60.3 billion increase in … Read More
The key to China’s economic progress will be the rapid growth of the country’s middle class. In a research finding, Credit Suisse predicted that the household wealth in the country will double to $35.0 trillion by around 2015, based on achieving sustainable GDP growth at or near the current growth rate.
The economic analysis is simple; the extra renminbi mean more cash to spend on non-essential goods and services. This includes furniture, real estate, vehicles, and travel. The mobile phone market is staggering at nearly 900 million users, which I discussed in “China’s Mobile Sector Still Sizzling.”
An area in China that I continue to believe has tremendous long-term potential is the auto sector, but the short term will pose hurdles.
I have been a big supporter of the Chinese auto sector, but sales have been slowing as the government eliminated credits for fuel-efficient cars in 2011 and, in trying to ease the traffic congestion on Chinese highways, set a quota on vehicles sold.
The slowing is quite evident. In the first quarter of 2012, auto sales fell 1.2% in China. In the 11 months to November 2011, auto sales increased a trepid 2.6% year-over-year to 16.8 million units, down from a staggering 30.0% and 50.0% growth in 2010 and 2009, respectively, according to the China Association of Automobile Manufacturers (CAAM). The growth in 2011 is the lowest since 1999 and clearly poses issues for carmakers.
Yet there are some positives for the foreign carmakers operating in China. Sales of foreign vehicles continue to top the charts, while the domestic brands fell 2.3% for the first 11 … Read More
These incentives that helped the economy “rebound” from the crisis add up to roughly $433 billion or approximately 2.9% of GDP (source: Bloomberg).
For the first quarter of 2012, Lombardi Financial believes that U.S. GDP growth is likely to come in well under two percent. For the remainder of 2012, I believe GDP growth in the one-percent range could be a best-case scenario.
The Congressional Budget Office (CBO) believes that GDP growth will be two percent in 2012. The optimistic economists believe that not only is two percent GDP growth attainable, but also higher levels can definitely be achieved.
For argument’s sake, dear reader, let’s assume a two-percent GDP growth rate for 2012. The CBO believes that, even after the tax benefits and spending increases expire, the U.S. economy will achieve GDP growth of 1.1% in 2013.
If the tax benefits and spending increases take away 2.9% of GDP growth in 2013, and GDP growth is to be 1.1% in 2013, then real GDP growth in the U.S. in 2013 would have to be four percent in order for these projections to materialize.
With the recession in Europe, the slowdown in China, and a U.S. consumer that is experiencing no real disposable income growth, the chances of this occurring are close to zero.
Even if these tax benefits and spending increases are extended another year, and GDP growth in 2013 is in the 3.0%-3.5% range, we know the economy is not growing on its own, but … Read More
U.S. consumer debt levels increased by $19.3 billion in December, after November’s steep rise of $20.0 billion, bringing total consumer credit in 2011 in the U.S. to $2.5 trillion (source: Federal Reserve).
Some economists are hailing this as a sign that economic growth is on the rebound, due to the consumer exhibiting confidence by taking on more debt.
Normally, in times of economic growth, income levels rise, job growth is widespread, and consumer assets increase in value, which provides the consumer with wealth (or perceived wealth). In times of typical economic growth, increased consumer credit can be seen as a sign of confidence.
However, in this current environment, we are witnessing real personal incomes falling over the last few years. Wage growth has been stubbornly anemic. We’ve had a minor pickup in job growth, but nothing sustainable as of yet. In the meantime, consumer assets (real estate and stocks) have been flat to down over the last few years. No economic growth here!
Combine this with rising food and energy costs (see “Michael’s Personal Notes” below), and one can only conclude that the increase in credit is a result of people trying to maintain their standard of living and paying their current bills; this is not economic growth.
As I’ve written before, almost one-in-two American households receive some form of government assistance. With the underemployment rate—“U6”—still at 15.1% (the rate includes discouraged people who have stopped looking for work and those part-time that would like full-time work), 46 million people on food stamps and real personal incomes flat, credit expansion can only be the result … Read More
Profit Confidential — IT'S FREE!
"A Golden Opportunity for Stock Market Investors"