New GDP Numbers: Maybe Media Underestimated U.S. Resilience
The new GDP numbers (which cover the first quarter of the year) show an annualized change of a bit less than negative 5%. That means that during the first quarter of this year, we produced about 95% as much wealth as we produced in the previous quarter. Remember that the crisis was well on its way halfway through that quarter and the country was pretty much on lockdown during March (which makes up 1/3rd of that quarter).
Seems like negative five percent is considerably less dire than the headlines had led us to expect.
So what happened? We bought more of some things and less of others.
Yeah, we bought a lot of toilet paper and canned goods, but it was not enough to make up for washing machines, dryers, and fridges. Still, given how hard things were hit in March, less than 5% shrinkage in new output? It could have been worse, and almost certainly will be in the 2nd quarter. But in my experience, actual real world data is usually less dramatic than the impression created by media. 5% shrinkage is not a total shutdown, its a 1/20th shut down. If we get 30% shrinkage next quarter — as some large investment houses have suggested (and boy did it get headlines) — that’s a 1/3rd shutdown.
“Spending on durable goods like new cars and appliances decreased at a 16.1% pace, while spending on nondurable goods rose 6.9%, likely a reflection of stockpiling on essentials like food and paper towels.”
Trade got hit, probably due to an artificially strong dollar. Travel was devastated, but it is a small section of the economy. Tech business services got hit hard, and that’s big. Capital spending was hit hard, which is not a big GDP item, but it is a Gross Output item, so that leaves a mark. Uncertainty and capital spending do not mix.
All in all, America beat expectations – again.
Originally published on Townhall Finance.
Jerry Bowyer is a Forbes contributor, contributing editor of AffluentInvestor.com, and Senior Fellow in Business Economics at The Center for Cultural Leadership.
Jerry has compiled an impressive record as a leading thinker in finance and economics. He worked as an auditor and a tax consultant with Arthur Anderson, as Vice President of the Beechwood Company which is the family office associated with Federated Investors, and has consulted in various privatization efforts for Allegheny County, Pennsylvania. He founded the influential economic think tank, the Allegheny Institute, and has lectured extensively at universities, businesses and civic groups.
Jerry has been a member of three investment committees, among which is Benchmark Financial, Pittsburgh’s largest financial services firm. Jerry had been a regular commentator on Fox Business News and Fox News. He was formerly a CNBC Contributor, has guest-hosted “The Kudlow Report”, and has written for CNBC.com, National Review Online, and The Wall Street Journal, as well as many other publications. He is the author of The Bush Boom and more recently The Free Market Capitalist’s Survival Guide, published by HarperCollins. Jerry is the President of Bowyer Research.
Jerry consulted extensively with the Bush White House on matters pertaining to the recent economic crisis. He has been quoted in the New York Times, The Wall Street Journal, Forbes Magazine, The International Herald Tribune and various local newspapers. He has been a contributing editor of National Review Online, The New York Sun and Townhall Magazine. Jerry has hosted daily radio and TV programs and was one of the founding members of WQED’s On-Q Friday Roundtable. He has guest-hosted the Bill Bennett radio program as well as radio programs in Chicago, Dallas and Los Angeles.
Jerry is the former host of WorldView, a nationally syndicated Sunday-morning political talk show created on the model of Meet The Press. On WorldView, Jerry interviewed distinguished guests including the Vice President, Treasury Secretary, HUD Secretary, former Secretary of Sate Condoleezza Rice, former Presidential Advisor Carl Rove, former Attorney General Edwin Meese and publisher Steve Forbes.
Jerry has taught social ethics at Ottawa Theological Hall, public policy at Saint Vincent’s College, and guest lectured at Carnegie Mellon’s graduate Heinz School of Public Policy. In 1997 Jerry gave the commencement address at his alma mater, Robert Morris University. He was the youngest speaker in the history of the school, and the school received more requests for transcripts of Jerry’s speech than at any other time in its 120-year history.
Jerry lives in Pennsylvania with his wife, Susan, and the youngest three of their seven children.