4Q GDP – the expectations game

So — yesterday there were stories about how 4Q GDP would hit 3%. This morning, the BEA announced a 2.8% growth in GDP in the 4th quarter. And all of a sudden good news is bad, as the Wall Street Journal noted: “Stock Futures Take Hit After GDP”. This, even though as the Journal noted in another story, “The U.S. economy grew at its fastest pace in more than a year and a half in the final three months of 2011, signaling a sturdier recovery took hold despite troubles in other parts of the world.”
And I would note that this is the “advanced” estimate of GDP. It is subject to revisions, to be release on February 29 (second estimate) and March 29 (third estimate). So the number will change – guaranteed.
By the way, the same thing happened yesterday with respect to the Index of Leading Indicators — as the Wall Street Journal reported: “The December increase was half the 0.8% increase expected by economists surveyed by Dow Jones Newswires, but the index has increased for three consecutive months, indicating a strengthening domestic economy, the [Conference Board] report said.”
Maybe we should stop asking economists for their predictions.
I will stick to what the numbers say, not economists guesses as to what they might say. The economy grew by a modest but increasingly larger amount in the 4th quarter of 2011. And the biggest drag on the economy was the cuts in government spending.

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