October 24, 2011
GETTING OUT OF OUR OWN WAY:
Glimmers in Recent Data Brighten Economic Views (JUSTIN LAHART, 10/24/11, WSJ)[UBS economist Maury Harris] had a third-quarter GDP estimate of 2.5% growth at the start of August, cut it to 1.5% at the start of September and a week ago revised it up to 2.6%.
One reason economists such as Mr. Harris raised their estimates is the marked improvement in recent data. The Commerce Department's September retail-sales report not only showed spending grew at its fastest pace in seven months. It also included substantial upward revisions to August's figures. Capital-goods shipments suggest business spending on new equipment has been strong. Another surprise for many economists: a pickup in construction activity.
But economists also got caught up in the country's pessimism. When the stock market dived in August, and surveys showed households and business executives becoming grim, they assumed the economy would take it on the nose. And they were wrong.
"I'm reminded of how all us U.S. economists hit the panic button in October of 1987, how we thought, that's it, we're in for a hellacious recession," says Normura Securities economist David Resler. "But it turned out it was only a blip." Mr. Resler cut his estimate for third-quarter-GDP growth from a 2.5% rate to 2% in August, but he has since raised it to 2.8%.
Indeed, once all the data was in (more than a decade later) it turned out not to even be a blip. There was no recession in 1987, nor in 1991 nor 2001. The Volcker/Reagan boom was so powerful it took Democratic thwarting of free trade growth, Republican thwarting of free immigration, massive derivative fraud, Fed rate hikes into a deflation and the House GOP opposing the credit fix to give us our first recession since the early 80s.
The Fed has gotten out of the way. Trade pacts are passing. There's fairly little work left to do to resume the boom times.
Posted by oj at October 24, 2011 6:41 AM
Tweet