GDP growth, 2007 Q3 final

There's good news and bad news: Third quarter GDP was revised upwards again, largely due to exports.  That's the good news, and here's the usual chart.

The bad news: According to pessimist Nouriel Roubini, unmitigated disaster is just around the corner.  He differs from the typical doomsters, who have said repeatedly—since I started listening forty years ago—that financial collapse and chaos were ten years away (...which gave us plenty of time to run to the bookstore to get their how-to-survive-it book).  But Roubini keeps saying it will arrive with the next quarter's GDP report.  Will he be right this time?

Here's a transcript of Roubini's appearance on Larry Kudlow's show yesterday.  (As usual, Kudlow took the optimistic stance, but made sure the viewpoint of the "perma-bears" was respectfully represented within his guest list.) 

So, I'm looking forward to the January GDP report (for Q4 '07).  Brian Wesbury says Q4 should come in around 2.0% real growth; Roubini says 0.0% or less.  It depends largely on how much the housing sector problems have carried over into the rest of the economy. 

Comments

[Boghie]

Steve,

My guess is that we are at - or nearing - the bottom of the housing sector problems.

So, I will guess a 3.5% GDP growth. At least.

If the housing sector is our only real problem then watch out!!!

[CoRev]

Steve and Boghie, I think as usual, the story will be mixed, but definitely way above 0%. I think more likely slightly over 2%. I hope I am too conservative in this estimate.

[Stephen Reed]

The personal consumption numbers just released today were generally excellent. So far, the Wesbury thesis of a little slowdown and higher inflation seems to be playing out.

[pawnking]

The question of why the housing market slowdown hasn't (yet) much affected the overall economy is a great one. Ditto for $100 oil. Remember a year ago when so many were claiming that $60 oil would certainly tip us into recession?

Assuing our growth continues, a lot of pundits will be mopping up the egg off their faces with new theories of what causes recessions. Myself, I cannot believe we continue to show quarter after quarter of growth despite all the bad news. Any ideas as to why?

[salvatorem]

Roubini has been preaching the crash for two plus years. His current argument is that we are now in a solvency crisis instead of a liquidity crisis, yet he offers no data to support his claims. But if he is right, the Fed's new TAF should make that clear one way or the other by pressuring the Libor spread. I for one shall remain fully invested until his crash materializes. In the meantime, Wesbury, Louis Navellier, and Societe Generale provide very sound reasoning that suggests otherwise.

[Bob]

I won't predict Q4 GDP because I think it's a guessing game at best.

Roughly 70% of GDP is personal consumption. If that is a strong number and exports remain strong things look good.

I've heard different views on whether or not we are out of the woods on housing. I'm undecided. Auto sales don't look very rosy, though.

Ah, but there's some potential trouble brewing a few years out. I'm speaking of course, of the idiotic energy bill just passed.

Would like Steve's take on it at some time.

I like the WSJ editorial today:

Dim Bulbs

referring to Congress. And, I'll call Bush on it as well.

[Rick Ballard]

"The question of why the housing market slowdown hasn't (yet) much affected the overall economy is a great one."

The answer seems to be that nonresidential has picked up much of the slack:

http://www.census.gov/const/C30/total.xls

http://www.census.gov/const/C30/totsahist.xls

It will take most of '08 to clear the 200K unit overstock in housing inventory at current sales rates but it could happen much more quickly if sentiment concerning the actual bottom having been reached solidified.

[Steve Dalton]

Good point that residential was probably and is probably being replaced by commercial construction. I am a personal example of that move, home builder becomes commercial contractor in the last 12 months.

[Jason]

Isn't the Roubini transcript from 2006? I was halfway through reading it before I realized something was wrong. Also fun to read prediction when you know the outcome. FYI, Q4 2006 real GDP was 2.45% (4.1% nominal) and there were no negative quarters in the first half so they were both overly bearish in their 2007 forecasts. And oil prices would go much higher, as we all know now.

[Jack Lane]

Hi,

I've been searching for a pie chart that shows what industries make up our GDP by percentage. It would be wonderful if there was a 1945 chart, a 1960 chart, etc. Any suggestions or, better, links?