Don’t say that the United States is entering a recession. Not yet at any rate. For a true recession to be present, the gross domestic product (GDP) has to be negative for two consecutive quarters. On Friday came the first look at the preliminary report on U.S. GDP.
GDP rose by 1.5% on the headline figure, and the price weighted index was up by 0.7%. Bloomberg was calling for a reading of 1.2% on the headline figure (Dow Jones was calling for +1.3%) and it was expecting 1.6% on the price-weighted index. Bloomberg also had a range of 0.9% to 2.4% on the headline GDP data and a range of 1.2% to 2.2% on the price-weighted index.
One big caveat is that this report included annual revisions going back several years, although we do not always cover revisions when they go back a quarter or more. We would illustrate that there has been a slowing without taking the revisions into consideration: First-quarter GDP growth was up by 1.9% on an annualized rate, while the fourth quarter of 2011 was up at an annualized rate of 3.0%. The revision showed that Q1 GDP was up by 2.0%, and the fourth quarter of 2011 was revised much higher to 4.1%.
We were not expecting any death-crush number today, but we also were not expecting much upside. We would also caution that the preliminary GDP report is just the first look and the data often looks very different by the second revision. A word of caution is that the slowdown began to occur in the last half of the quarter.
Companies such as Wal-Mart Stores Inc. (NYSE: WMT) are very important GDP barometers because of the consumer aspect. With its shares now effectively at all-time highs, we had some hope today even though broader consumer spending is not as strong. General Electric Co. (NYSE: GE) also is still above the $20.00 mark after earnings, another sign that things are OK. After all, if one company can be a barometer of the broader economy it is GE. Exxon Mobil Corp. (NYSE: XOM) is now well over $100 billion in quarterly revenues, and its shares are now within striking distance of a 52-week high after its earnings despite, the issue that oil prices fell in the second quarter.
Now the bad news. Today’s weak numbers are not weak enough to tip Ben Bernanke and the FOMC into more creative methods of quantitative easing. This positive GDP is also still a very weak economic growth measurement.
JON C. OGG
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