Yesterday, we learned that US GDP unexpectedly contracted 0.1 per cent in Q4, which was much worse than the 1.1 per cent growth expected. Economists spent most of the day downplaying any concerns, arguing that the number was “grossly distorted” by volatile government spending and inventory numbers.
The 2012 annual growth number, however, may have gotten less attention than it deserved, says Art Cashin, UBS Financial Services director of floor operations.
From this morning’s Cashin’s Comments:
The Other GDP – While most of headlines concentrated on the 4th Quarter GDP, it did give us a look at the annual GDP for 2012. It figures to about 1.5% (not the 4% growth that I think was the Fed’s projection).
For why that annual reading may be important, let me quote my Bloomberg pal, Rich Yamarone:
The year-over-year change in real GDP was 1.5 per cent. There has never been a time since measurement commenced in 1948 when the annual pace of real GDP has fallen that low without the economy ultimately slipping into recession. Sub-2.0 per cent readings are historically the warning signal.
Patterns can always change of course let but that one’s got a rather compelling history.
Maybe this time will be different.