The US economy’s growth rate has been revised upwards. Yesterday morning,
the Bureau of Economic Analysis released its latest estimates
for real and nominal GDP growth, shown below.
[UPDATE: Click here for a brief, explicit summary of the math.]
Here’s an oddity, good for a chuckle: The Associated
Press speculated that the stock market jumped up yesterday (DJIA +94, 5/25/06)
because of a triple negative: GDP growth is lower than “expectations,” which
lowers inflation “expectations,” which lowers the “expectation” of future Fed
rate hikes. All of that supposedly yields a positive outlook for
stocks. In short, slower-than-expected real GDP growth is supposed to be
good news.
I don’t happen to agree with that, because I’m not ready to subscribe to the
notion that real growth is inflationary. (Think about that.
"Real growth" means "growth excluding inflation." I'm
having trouble giving a lot of weight to the assertion that
"growth-excluding-inflation causes inflation." Sounds like
outdated Phillips curve thinking to me.) Besides, nobody asked me
what my "expectation" was, so they didn't have a very good sample of
"expectations"—in my opinion.
But I’ll set that quibble aside for now; I’m just happy that the BEA now
thinks the economy is growing faster than they thought it was growing a month
ago. And I’m happy that the stock market bulls, today, seemed to approve
of the growth situation more than the bears disapprove.
By the way, I recalibrated the debt clock using the new GDP numbers.
Faster GDP growth slows down or reverses the tick rate on the debt-to-GDP
ratio—which is still increasing, but at a rate that’s only noticeable about a
mile to the right of the decimal point, and there aren't many monitors that
give me enough room to display all those decimal places. Word to the
wise: don't go on a hunger strike waiting for the ratio to tick up a tenth.
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ps- I was trying to post this article all day (Thu), but high traffic volume from reddit.com was blocking my upload attempts. Everybody was coming to see the pie chart of who owns the national debt. I sure wish I was getting a nickel for every hit... but then, I guess this wouldn't be a hobby any more, would it?
