U. S. Economy Slows to a Standstill: THE SKY IS FALLING!

No it’s not.  Economic  growth did shrivel to slightly less than nothing in

Economist letters

Economist letters (Photo credit: viralbus)

the fourth quarter as reported Wednesday, which surprised most everyone.   But it must have put smiles on the faces of  Obama haters throughout the land.  See we told you so!   As is so often the case, a closer look reveals a different picture.

According to various sources several factors came into play.   Reuters sums up the main downward drivers this way:   “If it were not for the hit from slower inventory growth and the deepest plunge in defense spending in 40 years  (*1.), the economy would have grown at a respectable 2.5 percent rate. In addition, economists said Superstorm Sandy, which struck the East Coast in late October may have reduced GDP by about half a point. “

So, that accounts for 3.0% of our lost growth  and you can learn a bit more about other factors if you click the link to Reuters above.  Or you could just accept the conclusion of  Mark Zandi, chief economist for Moody’s Analytics. “I don’t really read anything into the number…  I don’t think anything has fundamentally changed in the economy.”

That’s not good news, but it is not such bad news, either.  In addition, according to the Washington Post:   “Economists also cautioned that Wednesday’s report was the government’s first crack at measuring economic activity in the fourth quarter and that the data are often revised.   An updated report is slated for release Feb. 28, and many economists predicted it will be more upbeat.”

Not among that number is Steve Ricchiuto, chief economist at brokerage firm Mizuho Securities:   “The preliminary number is negative,” said Steve. “But the recovery is supposedly gaining momentum. Sorry, I don’t see it.”

And in the weeks ahead we might encounter some rough fiscal waters in the form of  Sequester and Debt Ceiling battles in Congress.   In pondering our economic Titanic slowly  sputtering forward amidst the swells, I recall a quote I like:  “Pessimists are cowards and optimists are fools.” (*2.)


(*1.)   Business Insider offers a striking chart  depicting what they call a “Jaw-Dropping Decline In Military Spending That Clubbed GDP” (this comes compliments of reader MB).

(*2.)   This expression was often stated by a little known German philosopher, Heinrich Blucher, the husband of the much better known political theorist, Hannah Arendt, who both escaped Nazi Germany.  I also like the expression:  “While the pessimist may prove right in the end, the optimist has more fun along the way.”  I combine them into:  Hope for the best but plan for the worst.  Not that I always follow my own advice, of course.

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