Q4 2012 GDP Revised to a Barely Breathing 0.1%

Q4 2012 real GDP grew by just 0.1% after the second revision.  While technically not in contraction, 4th quarter gross domestic product results imply the economy was officially D.O.A.   Trade imports plunged, which helped economic growth.  Government spending cliff dove and sucked out -1.38 percentage points from 4th quarter real gross domestic product growth as federal defense spending declined 22.0% from Q3.   Private inventory changes hacked off -1.55 percentage points from Q4 real GDP as businesses shed their inventories.  Even without inventories in the economic growth mix,  the economy is still suffering from weak demand.

Bad News for Economic Growth as Q2 2012 GDP is Revised Down to 1.25%

Q2 2012 real GDP now shows 1.25% annualized growth after revisions. The advance second quarter GDP estimate was 1.5%, whereas the second revision reported 1.7% GDP growth. The BEA rounds their final GDP numbers, so the actual GDP reported was 1.3%. When we're grabbing economic crumbs, 0.05 percentage points makes a difference.



What the Q2 GDP third estimate shows is a barely breathing economy. Businesses shed inventories, consumers spent way less, a dramatic swing from the Q2 GDP advance report and investment generally is down from the 1st quarter. Shedding inventories can be a recession indicator. Durable goods spending literally vanished in Q2, also a recession indicator. The drought showed up in Q2 GDP, negatively impacting farm inventories and potentially other GDP components indirectly.

Construction Spending Declined, -1.1%, in February 2012

The Census, part of the Commerce Department, today released the monthly construction spending report. This is a monthly tally, reported seasonally adjusted, annualized, of how much money was spent on construction. Spending was $808.9 billion in February. The survey has been done since 1960. The below graph shows just how badly construction spending imploded since 2008.

SEC Charges Alternative Energy With Fraud

The SEC has charge an Idaho company, Alternative Energy with fraud:

The Securities and Exchange Commission charged an Idaho company on Thursday with fraudulently raising money from investors across the country and Asia to build a $10 billion nuclear power plant.

The SEC also asked a court to freeze the assets of Alternate Energy Holdings Inc. and its two top executives.

Make Corporations Invest in America

Naked Capitalism's Yves Smith, along with Rob Parenteau, wrote an op-ed in the New York Times. It brings to light corporations are sitting on profits and not reinvesting in their companies and America.

Over the past decade and a half, corporations have been saving more and investing less in their own businesses. A 2005 report from JPMorgan Research noted with concern that, since 2002, American corporations on average ran a net financial surplus of 1.7 percent of the gross domestic product — a drastic change from the previous 40 years, when they had maintained an average deficit of 1.2 percent of G.D.P.

They mention the obsession with quarterly profits as one reason corporations are sitting on wads of cash. Investors are also in part to blame. The minute a quarterly earnings miss or quarterly profits are not bigger than the last, investors pummel and punish a stock.

Also mentioned the reason corporations are sitting on profits and not reinvesting is to pay obscene executive compensation packages.

The point is to create corporate tax code changes to make corporations reinvest those profits back into their companies.