This morning’s headline GDP numbers were pretty horrific, but the Dow is up 110 points, perhaps because of that one consumer spending green shoot.
And as deep as the number is, it’s possible we’ll see positive growth very soon.
So says Richard Moody at Forward Capital:
While not discounting the ugly headline number, the details of the Q1 GDP report at least support the contention that the worst of the contraction is past. Given the size of the drawdown in Q1, business inventories are more closely aligned with sales, and the current quarter will not see the aggressive paring of stocks that acted as a key drag on overall GDP in Q1. Also, with more of the government’s stimulus spending filtering through to the economy, federal government spending will likely advance at a fairly healthy clip during Q2. With residential construction nearing a bottom, even should residential investment decline in Q2, the deduction from top-line real GDP growth will be considerably smaller than the 1.36 per cent deduction seen in Q1. Thus, through the process of what we call addition by less subtraction, the deductions from real GDP figure to be significantly smaller in Q2 than was the case in Q1. As such, a modest increase in real GDP during Q2 is not out of the question.
Addition by less subtraction. Well, that’s something.
(photo of “green shoots” courtesy of Shellac)