by Kristjan » Mon 01 Feb 2010, 17:47:35
$this->bbcode_second_pass_quote('rangerone314', 'S')omething about GDP +5.7% at this point reminds me of the "dead cat" bounce that sometimes happens in a stock market.
Could you be more specific, please?
OK, I'll answer that myself.

The reason why you feel like it was a dead cat's bounce is because it kind of was... a large portion of the GDP growth was attributed to inventory restocking (inventory stocking is counted as an investment in the GDP number, GDP=Consumption+Govt spending+Net Exports+Investments). Restocking was needed because last year, businesses were getting rid of their inventories and were unwilling to restock because they were unsure of the future. Now that things have cleared a little bit and every business knows where it stands, they can make investments.
But I don't think this is a dead cat's bounce. Why? Because businesses will have to start rehiring. If you look at the number of people that were laid off and compare that to previous recessions then you will see that businesses overreacted. You can't blame them, really, because everyone and their mother was panicking last year. But given the way things are right now, businesses have really stretched their buck and if they want to expand further, they will have to start hiring. In addition, if you look at the other macro data that came out today, you will find further confirmation that things are slowly starting to look up. Private consumption increased, wages increased (yeah, I know, not a lot of people are working these days but this is a positive sign nonetheless).
I understand that for some it is very easy to get caught up in the Peter Schiff world where every economic figure, bet it negative or positive, is really negative. But you need to get over that and look at the real world. Yes, the government is fudging the numbers somewhat. Yes, government spending can and has artificially boosted the GDP number. But if you get consecutive quarters of economic expansion and all or most of the economic indicators are supporting that, there is no reason to doubt the numbers. I mean, people don't trust most of what the elected (and unelected) officials tell them, but why do they trust everything Mr. Schiff or Mr. Roubini tells them? You need to think for yourself a bit. And remember, Mr. Schiff is just another (aspiring) politician who is trying to get elected. (I don't want to start a discussion around Mr. Schiff or Mr. Roubini, they were just the first examples that sprang to my mind. You can replace their names with any überbears' names you like).