The broadest gauge of U.S. economic output, from the Commerce Department, tracks the economy on a quarterly basis. The private forecasting firm Macroeconomic Advisers provides a measure to track gross domestic product on a monthly basis…Macroeconomic Advisers on Thursday said its monthly estimate showed GDP fell an inflation-adjusted 1% in March, the largest drop since December 2008. – Wall St Journal – LINK
(click to enlarge)
The Kool-aid drinking Keynesian economists are attributing the poor GDP report for Q1 to a drop in exports. That’s an absurd notion, of course. Especially if we were to re-adjust the GDP estimate with a true GDP-price deflator (inflation measure). These guys always have some excuse, whether its the weather or the port strike on the west coast.
How about just the simple fact that the overleveraged, underemployed American middle class has finally hit a wall in its ability to consume beyond everyday necessities?
Yes, exports were down in Q1, but I guess that has nothing to do with the fact that the entire global economy is in the throws of an economic collapse. Real imports of goods and services were estimated to be up 1.8% in Q1 vs. 10.4% increase in Q4 2014. In other words, exports declined but the rate of imports slowed considerably.
About those retail sales (click to enlarge, source: Bloomberg):
This graph shows the monthly % change (left axis) and year over year % change (right axis, red line) in total retail sales. As you can see from the blue line, there’s been a decleration in year over year retail sales since May 2013. So much for the “polar vortex” fairytale. Retail sales have been slowing down starting six months before (July 2013) the polar vortex allegedly affected the ability of consumers to use their credit cards in a manner which pleases the Keynesian central planners. The red line shows us that the deceleration in retail sales growth accelerated in October 2014. This includes three months in a row (red box) of negative monthly retail sales.
This next graph shows retails sales year over year ex-automobile sales (click to enlarge):
As everyone knows, auto sales have been fueled by the a bubble in subprime auto loans – auto loans which are starting to go delinquent and default at an alarming rate. If you strip out this artificially induced demand for new cars, retail sales have been declining on a year over year basis since mid-2011. No wonder the Fed implemented “Operation Twist” in late 2011, followed by QE 2 shortly thereafter. Furthermore, the year over year decline in retail sales ex-autos started to accelerate downward in late 2014.
One last data point. Construction spending. To the extent that there’s been any “strength” in the economy, it’s come from auto sales and the housing market. Auto sales have been fueled primarily by an explosion in subprime auto lending, market by extraordinarily easy lending standards and extending payment periods out to 84 months, which is longer than has been typical. Delinquencies are already rising quickly. The other source has been 0-3.5% down payment mortgages made available by the Government-owned mortgage entities. BOTH sources of economic activity have been funded by the Fed’s QE program.
But the trend in construction spending has been declining since May 2012:
The Census Bureau provides the data input for the economic series. As you can see, by the Census Bureau’s own calculations, the decline in construction spending runs completely contrary to the wildly absurd housing starts report the agency released earlier today. One would think the Census Bureau and the Government could at least manage some consistency among its data-reporting fabrications.
The bottom line is that the primary sources of economic activity, retail sales, the housing market and auto sales are all beginning to slow down – retail sales rather quickly. This assertion is reinforced by the steady stream of economic reports released over the last few months which show that nearly all economic measurement data series are dropping at the same rate at which they were falling in the 2008-2009 period.
Regardless of the flood of Orwellian propaganda coming from Wall Street, the financial media and the various Government and quasi-Government agencies, by all valid economic activity metrics the U.S. economy is entering into crash mode. The problem faced by all of us is that the crash that is in front of us will be many multiples more severe than what occurred in 2008.