Rossputin.com Rational Thinking About Our World

The following is a note I sent to Stratfor after reading their short economic report entitled “Turning an Economic Corner“:

Rather than tout an “impressive turnaround", you should have noted that Q3 GDP was artificially boosted by “Cash for Clunkers” which added a full 1% to the number and by increased government spending which added 1/2% but does not represent anything positive for the long-term economic prospects of the US.  Another 1.3% of the growth came from non-auto consumer spending…a level of growth unlikely to be sustained. Indeed, the day after the GDP report boosted the stock market, a report of declining consumer income and spending (the first decline in spending in 5 months and the biggest decline since December) knocked the markets down 2.5% or more. A boost in construction spending which is also likely to be temporary added substantially to the Q3 GDP report.

Your statement that the “relatively pessimistic reaction in the United States, however, fits with the contradictory and complex American psyche."  No, it fits with economic reality and an understanding that the Q3 GDP numbers are likely artificial and unsustainable.