GDP worse, but consumption better. A lot of “buts” in the number.

GDP down 6.1%, Consumption up 2.2% Q/Q on an annualized basis..

Government Spending fell 3.9%.  This contributed to a -0.81% decline in the current GDP number

Inventories accounted for a -2.79% of the decline while Net Trader added 1.99%. Consumption added 1.5% this quarter after a -2.99% and -2.75 decline in the previous 2 months.  Gross Private Domestic Investment contributed to a -8.83% decline of the GDP.  Within that sector Non Residential Structures declined 2.13% (not likely to rebound). The Equiptment and software contributed to a 2.55% decline (more likely to rebound) and Residential contributed to a 1.36% (not likely to rebound with supply of homes so high).

The 3rd decline in a row was the 1st time since 1975.

The mix in the numbers is what makes traders look at the future.  If inventories are  now in control, a decline next quarter will not occur.  Investement is a big minus for the GDP this quarter.    Within that component there is Residential and Non-Residential construction. With commercial real estate in the doldrums and the Residential supply still high, any rebound is unlikely going forward.  Businesses can increase investment in equipment, however, with a more steady economy.   Government is also a future contributor to GDP.  It is unlikely that this component will be a decline in the near future. 

Consumption which accounts for up to 70% of GDP is the wild card of course (and most important).  Will unemployment stop its move higher?  The weekly  initial claims are not showing it?  Will housing recover in the spring and spur on more trickle down spending?  The mortgage application data today suggests a healthy real estate climate seems more a hope than reality (so far).   These are the two most important problems facing the economy going forward and will need to rebound in order to truly rebound.  If they don’t, the green shoots may wither away.   Watch the weekly data in the spring.

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