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What’s Really Going on Inside the Latest GDP Number

14 | By Shah Gilani

Sit down before you read this.

It’s going to make your head spin and, worse, change the way you think about what’s real in America.

Christmas came early this year, for the market that is, by way of a gift from the U.S. Bureau of Economic Analysis.

However, this branch of the U.S. Department of Commerce, didn’t put its gift under anybody’s tree. They put it over all of us.

The gift was headline news that the “third revision” of third-quarter gross domestic product (GDP) showed the U.S. economy grew at a whopping 5% annualized rate, not the 3.9% rate posted in the “second revision.”

That sounds like good news, right?

Well, here’s what’s scary…

Bad Santa

“Ho! Ho! Ho!” said the stock market. Good news is now good news on top of bad news being good news for stocks.

And so, with just enough time before Christmas for the stock markets to react, we got a 5% “print” from the BEA, which pushed the Dow Jones Industrial Average above 18,000 while the S&P 500 made yet another all-time high.

Too bad the BEA is a Bad Santa. The latest revision was a “put-on.” The folks at the BEA put it over on all of us.

What they did to get to that 5% number – to make us all feel gifted by a robustly recovering economy, to get us to go out and spend spend spend, to get stocks to soar – was pure prestidigitation. It was pure legerdemain.

It was pure BS.

I’ll prove it to you. Here’s what the BEA posted on its website:

    “The GDP estimate released today is based on more complete source data than were available for the ‘second’ estimate issued last month. In the second estimate, the increase in real GDP was 3.9 percent. With the third estimate for the third quarter, both personal consumption expenditures (PCE) and nonresidential fixed investment increased more than previously estimated (see ‘Revisions’ on page 3).

    “The increase in real GDP in the third quarter primarily reflected positive contributions from PCE, nonresidential fixed investment, federal government spending, exports, state and local government spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.

    “The acceleration in the percent change in real GDP reflected a downturn in imports, an upturn in federal government spending, and an acceleration in PCE that were partly offset by a downturn in private inventory investment and decelerations in exports, in state and local government spending, in residential fixed investment, and in nonresidential fixed investment.”

In the second paragraph, the BEA says the increase “primarily reflected positive contributions from PCE, nonresidential fixed investment, federal government spending, exports, state and local government spending, and residential fixed investment.” Then in the very next paragraph, it says that “an upturn in federal government spending, and an acceleration in PCE that were partly offset by a downturn in private inventory investment and decelerations in exports, in state and local government spending, in residential fixed investment, and in nonresidential fixed investment.”

What?

How can you have an increase in PCE and the other stuff that was “partly offset by a downturn” in the same stuff the BEA said had increased?

I’ll tell you what’s going on.

Do Look This Gift Horse in the Mouth

The increase in personal consumption expenditures is all that matters. The BEA increased that number so much in the revision that nothing else matters.

Of course, its double-talk matters, but that’s just minor rubbish.

What the BEA gift-givers did in their revisionist juggling act was knock down personal savings by revising savings down over previous months by almost 20% and magically put all that money, about $140 billion, to work in the economy.

And presto, we had 5% GDP growth.

It gets funnier and freakier.

They said most of the increase in spending was on Obamacare. How many people do you know who bought into Obamacare last month?

They said last month we increased our gasoline and energy consumption by a whopping 4.1%. However, I recall oil prices falling almost 50% and gas prices falling more than 20% since late summer.

Go figure.

And about that PCE increase. We whooped it up spending on what? Christmas presents in July, August and September, long before Black Friday sales and Cyber Monday?

Maybe we did spend $140 billion earlier than we planned to spend on the holidays. Because we sure didn’t spend much on them.

According to most analysts, we saw disappointing Black Friday sales. And ShopperTrack had expected a $10 billion Super Saturday this year, but according to that analyst, sales on the last Saturday before Christmas were up only 0.5% from last year’s $9.1 billion.

RetailNext just said spending at specialty stores and large footprint retailers was down 8.9% over the weekend before Christmas versus a year ago. And traffic was down 10.2%.

We better be shopping online!

Okay, that’s getting ahead of the third-quarter numbers I’m talking about. But you get the point. How could we have spent $140 billion more in Q3 before the holiday season when the holiday season looks like a mini-bust?

Don’t even get me started on home sales.

Just say “Ho! Ho! Ho!” and enjoy the market rally while it lasts. The fabricators in our government bureaus are beholden to the powers that manipulate us all.

If it’s a feel-good feeling they want us to have, mission accomplished.

Happy holidays… suckers.

14 Responses to What’s Really Going on Inside the Latest GDP Number

  1. William Collins says:

    These is the same leftist tactics used before – use government “statistics” to deceive and manipulate the populace. Imagine the irony of lies of a robust economy coming from a group that despises the free market and one comes to understand the lengths to which the left will deceive and manipulate to get what it wants. In their minds the ideals they espouse are superior to all others, therefore they are justified to whatever means the deem necessary.

  2. Kevin Beck says:

    As it turns out, “Ha, ha ha!” might be more appropriate when looking at this fraud from the government’s point of view. But I guess those numbers are good enough for government work.

  3. elissa jung says:

    What comes to mind…’up the creek with out a paddle,’ ‘elephants backing up to the fan’ and lastly …’if it smells like s**t, looks like s**t. tastes like s**t, it is s**t..’

    Happy New Year

  4. SCUD says:

    THIS IS ALL WELL AND GOOD SHAH……EXCEPT THE STUPID SHEEPLE ALL BELIEVE IT AND FALL FOR IT HOOK, LINE AND SINKER.

    ONLY WHEN IT FAILS AND FINALLY FALLS FLAT …… WILL THEY SEE THE TRUTH. THEN THEY WILL ALL SAY……WHY DIDN’T WE SEE THIS COMING OR WHY DIDN’T WE SEE THE TRUTH OR WHY DIDN’T ANYBODY TELLS US THE TRUTH.

    ONLY WHEN IT FINALLY FAILS COMPLETELY WILL THESE DAMN PEOPLE INCHARGE BE RUN OUT OF TOWN ON A RAIL.

    BUT BY THEN IT WILL ALL BE TOO LATE …… FOR US DAMN FOOLS.

    REBOOT NEEDED!!!!!!!

  5. HYMN says:

    We have been lied to regarding GDP for quite some time now. However, this one is a whopper and the timing was well thought out. I’ll bet the “true” number is about half of that 5%. I doubt there are many who believe any thing TPTB have to say these days. Their game has really gotten ridiculous, and UNbelievable.

  6. John Molloy says:

    I always assume (bad word) that the numbers come from Peter Pan’s little pal.The inmates run the political asylum? Scary stuff for us old fart “unhappy campers. The Emperor is tossing his new duds everywhere. Egads! Thanks for your pithyinsight.

  7. jerrycollie says:

    We have to remember that the first print and the 2nd revision were also lies; it is just that their noses grow longer with each revision. George Orwell would be proud. The numbers we get are starting to look like the GDP prints we get from Red China. if China’s numbers were true, all the coolies would be driving BMW’s instead of bicycles. However, it does not really matter. In the financial markets a lie is as good as the truth. So I am selling Euros and buying Dollars.
    If I were to borrow $100 thousand from my banker and spend it in a government manner, that would not be a plus in my long-term financial situation. If the government borrows money and then spends it, that increases the GDP; but is that a good thing for the economy? If we were to deduct the money from the GDP that the government borrowed and then spent, I wonder what the GDP would look like?

    • David Allen says:

      Very well said! Government spending counted as GDP is a farce. They first take it from us and then give some of it back. Keeping a large portion as “operating expenses”.

  8. Robert in Vancouver says:

    The US gov’t makes up figures and data as required to make it look like they are doing a good job with the economy and job creation.

    The method of calculating unemployment changed in 1994 to make it look like everything is OK. If unemployment was calculated same as it was 20 years ago, the unemployment rate would be 22% today.

    The phony numbers keep the US Dollar from dropping to it’s real value, which would be about 40% to 50% lower than it is now.

    Such a drop in the US Dollar would force a sharp increase in interest rates, which would make it impossible for the gov’t to make interest payments on the debt and maintain gov’t programs such as welfare and pensions.

    Check out the website called Shadow Stats for some real eye openers.

  9. Richard says:

    Whaat? C’mon, Shah, do you really expect us to believe that the same government that gave us the Warren Commission Report is now lying to us?

  10. CHRISTOPHER BOWEN says:

    SHAH: Thanks for calling their bluff. Statistics don’t lie but liars can figure. We need your professional insight to expose the hazards of our virtual reality economy.

  11. Jeff Schneider says:

    I am curious about just what is the published paper trail for the BEA numbers and in just what forums the explanation of “Increased spending on Obamacare” and “increased gasoline and energy consumption” were presented. Is that all that is offered to explain how the $140 B decrease in savings was spent?

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