Well, that long-awaited day is here — the day where we get the first major indication just how bad the damage has been from the POR (Pelosi-Obama-Reid) Economy we’ve been living with since June 2008.
The third quarter of 2008 came in at an annualized -0.5%.
That’s bad enough, but as you might expect, predictions for the fourth quarter are coming in much worse:
(Link)
Economists polled by Reuters offered a median estimate of a 5.4 percent decline in U.S. gross domestic product on an annualized basis in the fourth quarter, the worst since the first quarter of 1982.
The estimates of 81 economists ranged from a decline of 3.0 percent to a drop of 7.0 percent.
(Link — Don’t let the Obama Administration see this; they want us to assume we’re all gonna die unless his “Porkulus” package passes)
Strange as it may sound, there is a way an ugly fourth-quarter gross-domestic-product report could be a sign good news is afoot.
The Bureau of Economic Analysis on Friday takes its first crack at estimating GDP in the last quarter of 2008. Economists think inflation-adjusted GDP fell at a 5.5% annualized rate, the worst since 1982, as the economy was suffocated by the disappearance of credit.
Often such sharp declines in GDP are followed by significant snapbacks. The quarter following a GDP decline of 5% or more is positive 69% of the time in the past 48 such episodes in the U.S., U.K. and Germany, according to Merrill Lynch international economist Alex Patelis. He calls it a “heart attack” pattern because GDP’s course mimics the jagged line on an electrocardiogram.
(Link — These guys got the Obamemo)
Many economists think the decline will be a whopping 5 percent or more - which would make it the worst quarter for the U.S. economy since 1982.
“When we see fourth-quarter GDP … it will be bad,” said Nigel Gault, chief U.S. economist at IHSGlobal Insight, an economic forecasting firm in Lexington, Mass. “What today’s numbers tell us is that first-quarter 2009 will be just as bad.”
Ben Herzon, senior economist of Macroeconomic Advisers, who said the GDP growth rate will likely be negative 5.5 percent, told USA Today, “It’s going to confirm what we already know, and that is we’re in a severe recession.”
Gloom has grown with the spreading realization of the refusal by Nancy Pelosi and Harry Reid to back down from their insistence on starving the economy of energy in the name of what might be the greatest fraud in human history, Barack Obama’s campaign promises of huge tax increases on the most productive (deferred but not deleted), and, more recently, the dogged determination on the part of all three players to ram a comically misnamed “stimulus” down the economy’s throat.
What to watch for: How many media outlets “forget” to include the word “annualized” or “annual rate” in their coverage, giving many viewers the impression that the economy shrunk by the amount reported all in one quarter (See Update below — The prediction came true twice in 20 minutes.)
The report will be here at 8:30. Here it is –
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 3.8 percent in the fourth quarter of 2008, (that is, from the third quarter to the fourth quarter), according to advance estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP decreased 0.5 percent.
Initial reax: Well, that wasn’t as bad as just about everyone thought. In fact, I’d characterize this as a huge miss by the prognosticators. It won’t be seen as that obvious, but it’s really no different than guessing -1.0% and having it turn out a bit less than +1.0%, which would most certainly raise eyebrows.
Initial theory: Factors cited in this post (lower gas prices, lower mortgage rates) began taking hold in December. This means that Obama’s race against the economy recovering on its own may indeed be on, and his lead may not be as great as he thought (better pass the Porkulus package quick, before those January and February reports start coming out).
I’ll have more to say later after reviewing the report and gauging media reaction.
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