Goldman Sachs: U.S. Economy Recovering at Only Half Official Rate

[papau]

What a great article - and not just because I agree with it!

http://www.miami.com/mld/miamiherald/business/national/8258155.htm

U.S. Economy Recovering at Only Half Official Rate, Research Shows

By Allister Heath, Sunday Business, London Knight Ridder/Tribune Business News


Mar. 21 - <snip>A growing number of discrepancies are emerging in America's economic numbers, including a dramatic over-estimation of manufacturing output. The latest analysis from Goldman Sachs suggests that the US economy may have grown by only about 2.2 percent in the year to the fourth quarter of 2003, considerably less than the official 4.3 percent.<snip>

Hatzius (senior economist at Goldman Sachs) said: "Over the last year, the official data show real gross domestic product (GDP) growing a sturdy 4.3 percent. Yet, non-farm payrolls are up only 0.1 percent. It is hard to overemphasise how unusual this combination is."

The results of the alternative, survey-based method have also been weak, recording a 1.5 percent rise in household employment since November 2001, the smallest gain of any post-war business cycle, despite the dramatic rebound in US economic growth on the official figures.

Big flaws in the manufacturing data are responsible, according to the Goldman research. Real GDP for goods, which accounts for 33 percent of total GDP, has surged by 8 percent over the past year, the official figures say, more than double its 3.6 percent long-term trend. But these figures are in complete contradiction with the standard data for industrial production (increased by only 1.4 percent), a closely-related and far more reliable measure calculated using separate data.<snip>

Real GDP for services and structures, which together account for the remaining 67 percent of GDP, rose only 2.6 percent, below their 3.4 percent long-term trend. It is unusual to see goods output surging at a time when growth in the other GDP components is lacklustre, suggesting flaws in the official estimates.<snip>

Another reason why the US official growth rate may have over-stated growth is because of its use of "hedonic pricing", a method which adjusts inflation for quality, other economists say.<snip>

Comparisons between growth in the US and the UK are also complicated by differences in accounting. "In particular, the use of hedonic pricing in measuring the value-added provided by the US high-tech sector gives a substantial boost to US output compared to that in the UK," says the London Business School's Economic Outlook.

[ugarte]

1. Anyone who buys groceries knows

that the ridiculously low inflation figures are way out of line.

[ewagner]

2. Finally

A well-respected, mainstream company is telling the "investor class" what we already knew: The emporer has no clothes!

[ochazuke]

3. Is it possible that Bushism has infected govt. stats?

Just like all the scientists and security analysts who come up with their best work and are told "WRONG ANSWER!"

Then, they come back with the figures that bush wants and they get to keep their job.

[teryang]

4. No doubt about it

it's totally politicized. What are you trying to do, drive down the market? It's another conspiracy theory! I hear the econo-pundits say this kind of thing every day. It's not that subtle. CNBC has a pretty good senior economist who openly expresses skepticism about this economy and the government figures. Recently, he said he estimates unemployment at 7.6 percent. This is unusual. The others even if they are short or bearish, always have to pay obeisance to the chimp junta as good for business, even though they know we are headed toward a cliff if he gets re-appointed. I think it's pretty obvious the economic figures are being falsified. The econopundits are so ideological, it's impossible for them to admit that the cycle can go bust when the fearless leader is in the WH feeding the robber barons.

One lone wolf who is bearish, has a credibility problem with the market manipulation going on now to raise the indexes. When they finally let him get a word in, he said that the 2003 market rise most resembled the 1933 market and that most people were unrealistic not to figure in the possibility of an extended downturn. Of course given the context of market barkers and political barkers who are just pumping and dumping, the guy sounds like a lunatic. But he isn't. The accumulators of capital make money coming and going. The financial service people who work for them are expendable just as we all are. Investors and asset holders are left holding the bag. Two days of up market and its happy days are here again, it's absurd.

There is no fundamental reassurance that energy prices will go down, that employment will go up nor that interest rates won't increase substantially. This war is not good for business. It is good for some politically connected companies but it is bad for business. Two experts pointed out that things were not getting better in Iraq, one of them said that it was getting worse. CNBC response, but look how the market went up since we invaded! It isn't going up now.