By William Trent, CFA of Stock Market Beat
BEA: News Release: Gross Domestic Product
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.2 percent in the fourth quarter of 2006, according to preliminary estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.0 percent. The GDP estimates released today are based on more complete source data than were available for the advance estimates issued last month. In the advance estimates, the increase in real GDP was 3.5 percent (see “Revisions” on page 3).
Last month, when the advance report came out, we trotted out our handy-dandy year/year unadjusted comparisons to provide some perspective. We noted that the supposed sharp acceleration (that has since been revised away) didn’t look so sharp based on the raw data. Here is the chart as it looked then:
And here is how it looks now, after the revisions.
Total GDP growth still looks steady as she goes. However, the business spending slowdown looks even more bleak than it had previously. This is further illustrated with a comparison of the GDP components before the revision:
And here it is based on today’s revision:
Personal spending has been strong despite the turmoil in housing. In a way, this is even more frightening because it leaves one to wonder what will happen if it does weaken. Unless business spending picks up soon, it could get ugly.
The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Landstar (LSTR) put options; Plantronics (PLT) put options
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