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Thread: U.S. economy bounces back sharply

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    Re: U.S. economy bounces back sharply

    Quote Originally Posted by imagep View Post
    Or it could mean that retailers expect our economy to improve at an even faster rate in the near future.

    Also, if we believe that production comes before demand, then the supply side is doing the right thing - creating jobs and increasing inventory. Soon, the increase in production should result in an increase in demand due to consumers having more jobs and thus more money to spend and save.
    It is always good to be optimistic and keep in mind that optimism can be dangerous to the quality of decisions built thereon. In this case the thing to watch is that a buildup of inventory means that the company no longer requires to buy until consumers have bought it. This means that to maintain the level of gdp we need growth of demand.

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    Re: U.S. economy bounces back sharply

    Quote Originally Posted by joG View Post
    It is always good to be optimistic and keep in mind that optimism can be dangerous to the quality of decisions built thereon. In this case the thing to watch is that a buildup of inventory means that the company no longer requires to buy until consumers have bought it. This means that to maintain the level of gdp we need growth of demand.
    Sure.

    What I was really getting at is that some on the far right seem to have this believe that demand is dependent upon supply. Even to the point that if producers randomly cranked up production beyond demand, that demand would increase to meet production.

    And there is some legitimate bases for that belief. If producers crank up production, then more jobs will be created, and consumers will have more money to spend. Alternativly, if consumers didn't spend more, prices would likely fall as produces had to compete harder for sales, and the value of the dollar would increase due to deflation - resulting in more products being purchased for the same amount of money.

    Typically our economy doesn't exactly work like that though because businesses do no seek to produce more goods than they expect to sell, thus there is rarely overproduction. Production normally follows the lead of demand, not the other way around.

    Now looking at this particular point in time, if half our growth was due to a build up of inventory, it's entirely possible that the other half of our growth which was demand driven, was also indirectly caused by that same build up in inventory. As long as the fruits of that production growth are shared proportionately between all income classes, demand should catch up to production soon.

    If the fruits of production aren't shared, then what you are suggesting may very well happen - a future cutback in production resulting in even lower demand, and thus potentially another recession.

    Regardless, there has to be a balance of allocation of money, between supply and demand, to maximize economic growth. We haven't had that balance since the Great Divergence.
    Last edited by imagep; 08-03-14 at 12:41 PM.
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    Re: U.S. economy bounces back sharply

    Quote Originally Posted by Khayembii Communique View Post
    The Fed doesn't have that much power over markets

    Lol !

    What the hell man ? Are you kidding me ?

    Please elaborate so I can correct you.

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    Re: U.S. economy bounces back sharply

    Quote Originally Posted by Dittohead not! View Post
    This was not an average winter.
    Plus, while most of the attention was focused on the North East, the South West, where most of the fruits and vegetables are grown, has been experiencing unprecedented drought.

    So, weather could easily drop the GDP that much. Another similar winter, and it will drop even more.

    Sorry, I'm not buying it for one minute.

    When was the last time WEATHER caused a 4 percent drop in GDP ?

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    Re: U.S. economy bounces back sharply

    Quote Originally Posted by Fenton View Post
    Sorry, I'm not buying it for one minute.

    When was the last time WEATHER caused a 4 percent drop in GDP ?
    Last year.
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    Re: U.S. economy bounces back sharply

    Quote Originally Posted by Dittohead not! View Post
    Last year.
    There was a 4 percent drop in GDP last year due to the weather ?

    I wonder, prior to the Obama administration's utter destruction of our economy was there ever a 4 percent drop in GDP because of inclement weather ?

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    Re: U.S. economy bounces back sharply

    Quote Originally Posted by Fenton View Post
    There was a 4 percent drop in GDP last year due to the weather ?
    According to Visbek, there was.

    Quote Originally Posted by Fenton View Post
    I wonder, prior to the Obama administration's utter destruction of our economy was there ever a 4 percent drop in GDP because of inclement weather ?
    Except that the policies Obama Administration, despite their slogans of "hope and change" are no different from those of the past administration.
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    Re: U.S. economy bounces back sharply

    Quote Originally Posted by Dittohead not! View Post
    According to Visbek, there was.
    Q1 GDP was likely down for several reasons.

    1) Yes, bad weather
    2) A drop in exports
    3) A decline in spending on health care

    We should keep in mind that 2014 was the coldest winter in the US since 1979. Most winters fall within seasonal adjustments; this one didn't.

    Oh, and keep in mind that it isn't the US government blaming Q1 on the weather. It's economists, bank analysts and others, who are not in the pay of the federal government.

    The big bounce in Q2 lends some credence to the weather theory, as personal expenditures jumped 2.5% in Q2 -- presumably due to pent-up demand. Most measures that make up GDP had a substantial increase, though, which suggests a broad-based (albeit again, not especially strong) recovery.

    In addition, weeks of indicators have suggested Q2 would be strong. 4% is a bit high, it may get revised down, but it really shouldn't surprise anyone who actually pays attention to economic data.

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    Re: U.S. economy bounces back sharply

    Quote Originally Posted by Visbek View Post
    Q1 GDP was likely down for several reasons.

    1) Yes, bad weather
    2) A drop in exports
    3) A decline in spending on health care

    We should keep in mind that 2014 was the coldest winter in the US since 1979. Most winters fall within seasonal adjustments; this one didn't.

    Oh, and keep in mind that it isn't the US government blaming Q1 on the weather. It's economists, bank analysts and others, who are not in the pay of the federal government.

    The big bounce in Q2 lends some credence to the weather theory, as personal expenditures jumped 2.5% in Q2 -- presumably due to pent-up demand. Most measures that make up GDP had a substantial increase, though, which suggests a broad-based (albeit again, not especially strong) recovery.

    In addition, weeks of indicators have suggested Q2 would be strong. 4% is a bit high, it may get revised down, but it really shouldn't surprise anyone who actually pays attention to economic data.
    Exactly. It's more than plausible that the severe winter was at least a factor in the decline of the GDP. It would be strange if such a winter didn't have some effect on the economy. The other factors you mention are also a part of it.

    It's the assertion that the Obama administration is destroying the economy, when the policies have changed so little from the past administration that is a bit hard to swallow for me, and I'm far from being a supporter of the current POTUS.
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    Re: U.S. economy bounces back sharply

    Quote Originally Posted by Visbek View Post
    Q1 GDP was likely down for several reasons.

    1) Yes, bad weather
    2) A drop in exports
    3) A decline in spending on health care

    We should keep in mind that 2014 was the coldest winter in the US since 1979. Most winters fall within seasonal adjustments; this one didn't.

    Oh, and keep in mind that it isn't the US government blaming Q1 on the weather. It's economists, bank analysts and others, who are not in the pay of the federal government.

    The big bounce in Q2 lends some credence to the weather theory, as personal expenditures jumped 2.5% in Q2 -- presumably due to pent-up demand. Most measures that make up GDP had a substantial increase, though, which suggests a broad-based (albeit again, not especially strong) recovery.

    In addition, weeks of indicators have suggested Q2 would be strong. 4% is a bit high, it may get revised down, but it really shouldn't surprise anyone who actually pays attention to economic data.
    Big bounce?

    - Domestic corporate earnings have generally disappointed (yes, some multinationals offshore holdings are doing pretty good - but their domestic sides are generally fair at best).

    - The unemployment situation is going sideways with almost no hirings in the last four months (since the 'bad weather ended) of full time plus all employment between the important 25-54 age range seeing only minor gains with the vast bulk of the hiring's in the young/seniors/part time areas.

    - And the DOW is down since April.

    That does not sound like the numbers indicative of a 'big bounce' to me.

    They indicate to me a somewhat stagnant economy that - despite almost 7 years of trillions in stimulus and 'Artificially' low interest rates - still cannot stand on it's own two feet.


    And remember, that 4% GDP was propped up by over a third by increased inventory.

    When the final revision comes through, I think the number will be closer to 2-2.5%.
    Last edited by DA60; 08-05-14 at 06:07 PM.

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