Why I Wasn't Impressed With Economic Data

Sometimes it does get old when mainstream media cheerleaders gush over any news it deems irrefutable and positive about the economy. The latest data suggest an "unexpected" solid performance in the last quarter, which suggested to many the recovery remains on track.

Of course much of the response came about because of the plunge in the stock market, temporarily disrupting the media narrative, which now can be resumed as if everything is okay.

What I want to talk about most is the government spending number, which was up about 2 percent. To me, that's almost the entire story of the surprising growth numbers.

Sure, corporate and consumer spending improve, and that appears to be legitimate. But when you include a 2 percent increase in government spending, that disproportionately pushing up the numbers because of the size of the budget, which if they were removed from the data, would have resulted in an unimpressive performance.

As for the corporate expenditures, my belief is a lot of that was because of the depressed commodity prices, which companies took advantage of. China did so as well, spending over 20 percent year-over-year on over 20 commodities. With reports suggesting this isn't sustainable, I think some figured this out, and attempted to lower future expectations.

Gold is still positioned well in this economic environment, and I believe the fake economic recovery will be exposed in the near future, as it already is in many other parts of the world, and gold will start to climb.

U.S. GDP Can't Break the 3 Percent Growth Mark

As has been the case for the last ten years or so, the U.S. economy continues to grow at a rate that has failed to meet expectations. The recently released numbers from the Commerce Department show GDP growth is at only 2.3 percent, significantly below the expected 3 percent being looked for.

It has been a full decade since the last time the GDP has grown above a 3 percent rate, making it the weakest recovery in about 70 years. Economic growth hasn't surpassed the 3 percent mark since 2005, according to the Commerce Department.

Another key factor is the continual drop in productivity, which according to the Labor Department, reached a high in 2002. Being a number of years before the Great Recession, it can't be considered the primary source of the drop in hourly output.

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Credit Suisse (CS), Federal Reserve Miss on Reasons for Lack of Corporate Spending

While Credit Suisse (NYSE:CS) and the Federal Reserve on correct on their conclusion that corporate America isn't spending, they're wrong in their conclusions as to why.

Neal Soss, chief economist at Credit Suisse, wrote in a note to clients, “The persistent accumulation of cash, as opposed to investment in new equipment and technologies, is not conducive to long-term growth. And if businesses aren’t growing, they certainly will not be expanding their payrolls fast enough to drive down the country’s worrisome unemployment rate.”

Soss concludes “[I]t is difficult to be persuaded by accusations of generalized corporate greed. Rather, we attribute the hesistancy of American firms to spend larger percentages of their cash flow mainly on an extremely rare and powerful money demand shock that encompassed the nation during the Great Recession.”

The idea of greed doesn't even make sense, as anyone that has run a business knows if there is opportunity a business will invest.

There is nothing more to this than the fact that there is no reason to spend money. The idea of businesses spending money in order to generate attempt to create a recovery is a governmental and socialist idea, not one a business would even think of.

In other words, businesses aren't spending because there isn't something out there they're confident will bring them a return on their investment.

If there was, they would be spending money. That's why the idea we're in a recovery is a joke. Just because the share prices of companies are bid up doesn't mean in any way the economy is growing. All that has to do with is investors and traders believing the companies will grow, not that it is a fact that they are growing.

Economic Forecasters See U.S. Economy Slowing Even More

Confirming the fact the U.S. economy is far from recovering and still in a recession, a survey by the Federal Reserve Bank of Philadelphia's survey of 43 professional forecasters revealed they expect the economy to slow down from prior estimates, and unemployment to continue on at present levels.

When asked about economic growth in the fourth quarter, forecasters said they see it dropping to an annual rate of 2.2 percent, down from the previous estimated economic growth rate of 2.8 percent.

The unemployment rate is expected to remain at the current level of 9.6 percent, even though seasonal hiring for the Christmas season has added some temporary jobs to the economy.

Don't be fooled by the increase in jobs in the private sector recently, they're going to be gone not long after January 1, 2011 arrives, as retailers and others get rid of their temporary help.

For the next year, job creation is expected to be lower than before as well, with nonfarm payroll employment estimated to grow at about 86,600 this month, and 104,200 a month after that. That's down significantly from the 114,100 projected for this month, and 159,300 from there. That's about 55,000 less a month than anticipated before.

In what is sure to be faulty conclusions, those forecasters looking forward to inflation see it coming in at 2.2 percent over the next decade, as measured by the CPI.

Of course that's largely a bogus measure, as it doesn't include food and fuel, which has already risen in price strongly, and will continue into the future.