Has the economy turned around?
Don’t bet on it (and note that this is MSNBC, not Fox News):
Unsold goods weigh on future economic growth
By John W. Schoen, Senior Producer
The U.S. economy perked up late last year as hiring accelerated and factories ramped up production. Unfortunately, a lot of what those factories made is still sitting in warehouses and on store shelves.
That doesn’t bode well for growth in the coming months.
At first blush, the numbers posted by the Commerce Department for gross domestic product in the last three months of 2011 looked strong. Overall growth advanced by 2.8 percent on an annual basis, a little weaker than economists had expected based on a series of other positive economic reports. That was much better than the 1.8 percent pace in the third quarter and the best showing since the second quarter of 2010.
But much of the fourth quarter growth came from businesses restocking inventories, which swelled by $56.0 billion, adding nearly 2 percentage points to GDP growth. The so-called ”final sales” number, which tracks how much was actually sold, rose a meager 0.8 percent.
“The pickup in GDP growth doesn’t look half as good when you realize that most of it was due to inventory accumulation,” said Paul Ashworth, chief U.S. economist at Capital Economics. “Despite the apparent improvement in some of the incoming economic data, it still looks like … another disappointing year.”
Ashworth is among a number of private economists who see the fourth quarter growth spurt easing this year. He expects to see U.S. GDP advance by just 1.5 percent in 2012.
Federal Reserve officials echoed that prediction this week, though they’re a bit more optimistic. The central bank is looking for growth of 2.7 percent in 2012, but the latest forecast was trimmed by two-tenths of a percentage point. The Fed expects unemployment to drop as low as 8.2 percent by the end of the year.
The lowered growth forecast prompted central bankers to extend their pledge to keep interest rates at or near zero for another year; they now expect to hold rates at rock bottom until at least 2014 to try to encourage businesses and consumers to borrow and spend more money.
Business investment slowed sharply in the fourth quarter after heavy spending earlier last year.
Consumers continued to do their part; consumer spending grew at a 2 percent annual rate, up a bit from the third quarter. Car sales zoomed ahead as the average age of the cars and light trucks on the road hit record levels. The replacement of those worn-out vehicles helped boost car sales by 14.8 percent.
Consumers are feeling a bit better about the outlook for the economy. A separate report Friday showed the University of Michigan consumer sentiment index edging up for the fourth straight month. But the level of confidence remains weak.
“Despite the rise, this and other confidence measures remain in recession territory due to global sovereign debt fear, Congressional dysfunction, and high food and energy prices,” said economist Mike Englund at Action Economics
Consumers have also fallen back on car loans and credit cards to maintain their spending. Consumer borrowing jumped by $20.4 billion in November, the Federal Reserve said Monday. That was the third straight increase and the largest monthly gain in a decade. Consumers have boosted borrowing in 13 of the past 14 months.
The gradual improvement in the job market may explain some of the rise in borrowing. But many households are also leaning harder on debt because their wages are rising as fast as the price of the goods and services they need to buy.
A breakdown of the fourth quarter GDP numbers, with Mark Olson, Treliant Risk Advisors co-chairman/former Fed governor; CNBC’s Steve Liesman & Rick Santelli
Personal incomes rose at an 0.8 percent annual rate, according to Friday’s GDP report, after falling for the last two quarters. Consumer prices are climbing at an annual rate of 3 percent, according to the latest government data.
Much of that spending appears to represent people buying goods, not services. That’s a sign that households are sticking to necessities, according to Joel Naroff, chief economist at Naroff Economic Advisors.
“The clearest sign that households remain cautious was in services spending,” he said. “This is the largest component of consumer demand and it fairly budged. People are not yet comfortable buying the little luxuries in life.”
With consumers tapped out and cautious, the economy faces other headwinds in the coming year. The housing industry remains stuck in the worst recession since the 1930s. A separate report Friday showed that the pace of new home sales fell in December, making 2011 the worst sales year since the Commerce Department first began collecting the data in 1963. Sales in December fell to a seasonally adjusted annual pace of 307,000 – less than half the 700,000 that economists say represents a healthy pace.
Slack sales have forced builders to slash prices, which has kept many would-be buyers on the fence until they see signs that the market has bottomed. The median sales prices for new homes dropped in December by 2.5 percent to $210,300.
Though ultra-low mortgage rates have made home buying more affordable than it has been in decades, mortgage bankers remain very choosy about to whom they’ll lend. Some 12 million potential “move-up” buyers are stuck with mortgages that are bigger than their homes are worth.
Growth in the fourth quarter was also held back by big cuts in government spending, which lopped 0.9 percent from fourth-quarter GDP. That belt-tightening will likely continue.
Why did we have all of this extra manufacturing? For the same reason that Charlie Brown tried to kick the football again: somebody (in this case the mainstream media) lied to them and told them everything was looking just peachy when it really wasn’t.
We saw the same exact thing happen last year: the media assured us that happy times were here again (because the same media that unceasingly demonizes the economy in any Republican administration unceasingly exalts it in any Democrat one) in the 4th quarter of 2010. And then suddenly it wasn’t the Holiday Season anymore and things went back to sucking.
Let’s look at a couple of facts a little more closely, beginning with the fact that as Obama begins his fourth year, the housing market that collapsed in 2008 to kill the economy is WORSE than it HAS EVER BEEN:
New home purchases fall, making 2011 worst year ever for sales
Thursday, January 26th 2012, 12:11 PM
Fewer people bought new homes in December. The decline made 2011 the worst year for new-homes sales on records dating back nearly half a century.
The Commerce Department said Thursday new-home sales fell 2.2 percent last month to a seasonally adjusted annual pace of 307,000. The pace is less than half the 700,000 that economists say must be sold in a healthy economy.
About 302,000 new homes were sold last year. That’s less than the 323,000 sold in 2010, making last year’s sales the worst on records dating back to 1963. And it coincides with a report last week that said 2011 was the weakest year for single-family home construction on record.
The median sales prices for new homes dropped in December to $210,300. Builders continued to slash price to stay competitive in the depressed market.
And what about 2012?
Housing Prices Will Bottom in 2012: Freddie Mac
By Shanthi Bharatwaj 12/14/11 – 04:33 PM EST
NEW YORK (TheStreet) — Housing prices are likely to move lower and bottom out in 2012 with modest appreciation likely in 2013, Freddie Mac(FMCC.OB) Chief Economist Frank Nothaft said in his outlook on Wednesday.
The Freddie Mac Housing Price Index is forecast to dip by 1% in 2012, marking the sixth consecutive year of declines. The index is expected to move higher by 2% in 2013.
The economist said in his report that national indexes masked sizable variation in local house-price performance. “Some markets have appreciated over the past year and are likely to gain further in 2012, while those markets with higher vacancy rates and relatively large distressed sales will continue to see downward price pressure over the next year.”
Anybody who says Obama “fixed” the economy is a liar or an idiot or a lying idiot. Because it was the housing bubble’s bursting that blew up the economy in 2008 – and the man hasn’t done a damn thing to fix it.
As for inflation, Obama has been like a curse from an angry old gypsy lady who pointed a finger at us and said, “You will vote for a fool to eat your wealth like a cancer!”
Food prices have skyrocketed.
Fuel prices have skyrocketed.
The Obama economic record is a very ugly thing indeed:
And as I have previously pointed out:
Barack Obama is destroying the middle class before our very eyes even as he incessantly claims to be the one standing up for the very middle class that he is destroying.
Under Obama, poverty has soared to its highest rate EVER in the entire 52 years that the Census Bureau has tracked it.
Obama’s reverend and spiritual mentor prophetically anticipated an Obama presidency when he screamed:
“No, no, no! NOT God bless America! God DAMN America!”
Hopefully you’ve had your fill of God damn America.