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U.S. economy shrank at a 1.4% annual rate in the first quarter

wsj.com

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Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#291

Post by conductr »

jermaustin1 wrote: post #160
colinmhayes wrote: post #83

Earlier quoted context omitted.

Also due to the fact that we stopped building new homes after 08. If supply keeps up with rising demand prices don't change.

This is a complete anecdote, but I am surrounded by new neighborhoods all built in the last couple of years, and some new ones being built now. We also have a BUNCH of new 4 story apartments that have never been seen in suburban Houston before 2020. I know Houston supposedly got a HUGE influx of people leaving NYC and SV in 2020-2021, but still, my home town of around 20k people just got 2 brand new neighborhoods in…

That's primarily linked to commodity/labor prices over the past couple years. And, to some degree because developers know that people buying in Texas have to buy. It's not like they're looking to upgrade from a current residence, they've already moved and have no place to live.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#292

Post by slaw »

tryptophan wrote: post #90
bitcurious wrote: post #78

Earlier quoted context omitted.

In my neck of the woods, by far the largest and most impactful inflation has been in the housing sector - 50% price inflation over the past two years. This is entirely attributable to the Fed's pumping of soft assets like stocks, leading to a bunch of paper millionaires cashing out.

> is entirely attributable to the Fed's pumping of soft assets like stocks The fed only stopped buying MBS a month ago. (Also, they hold like $2T+ of them on their balance sheet. Im sure the 'experts' over at the fed will say this has no effect on the current market)

I can't find any source that says Fed stopped buying MBS.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#293

Post by twelve40 »

sublatio wrote: post #268
adventured wrote: post #258

Earlier quoted context omitted.

It's an excellent measure of the typical societal well-being in fact. On average there is a strong correlation between the two globally and there has been during the entire post WW2 era at the least. It is the rare outlier that doesn't see a correlation between societal well-being and GDP per capita. Shall we stroll down the list of high GDP nations? Surely it's unnecessary, as we all know the names. Oh ok let's do i…

> There are no great societal paradises where the GDP per capita is ~$500-$5,000. Ok, not paradise, but a counterpoint I can think of might be Bhutan at around $3,200.

that's a country size of Sacramento. Even if it was a societal paradise (don't know much about that, life expectancy seems not great at 71), a sample of 700k people doesn't seem to crush the predictive power of GDP per capita.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#294

Post by conductr »

mupuff1234 wrote: post #95
taylodl wrote: post #55

The fact the Fed is even contemplating a rate hike tells me they're misreading what's going on. The inflation we're seeing isn't a result of a hot economy needing to be kept in check, it's the fact that 40% of China's production is on lockdown and just about every product made, regardless of where it's made, is relying on part(s) coming from China. Supply is constrained and therefore prices are rising. Likewise, supp…

I'm pretty sure that's why they waited so long to raise interests, as they thought supply chain issue would be resolved and all will come back to normal. Although that doesn't really explain the inflation of asset values.

Saving rate went through the roof and it's not stuffed under people's mattresses

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#295

Post by snake_doc »

mensetmanusman wrote: post #288
snake_doc wrote: post #276

Earlier quoted context omitted.

GDP ~= Capital * Productivity * Labor Population You’re missing an critical component from the Solow model. https://economics.mit.edu/files/7181

I wrapped capital up in productivity since machines/software/tools are a facet of how the labor population manifests productive use of time (and to simplify the discussion:) )

The interaction between capital and savings from an aging population is critical, as it delays the impact of population decline on output growth.

Japan is an excellent case of when labor population has declined/stagnated since 1990s.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#296

Post by Ekaros »

MuffinFlavored wrote: post #273
HFguy wrote: post #153

Earlier quoted context omitted.

It is a common mistake, but stocks don't have a positive return because GDP increases over time. They have a positive expected return over time because they have a risk premium. That is, to invest and take on risk, an investor will demand a return above and beyond the expected value of the cash flows the business generates. Whatever path of GDP and/or population is expected to be is already factored into the discount…

> You have an expected return because you are taking on risk. I have a dumb question. Most publicly traded companies rarely issue new shares. Why does a company care about its share price? If we are being rewarded for buying and holding their shares based on the growth a company makes quarterly, how does the company benefit from their share price going up? They don't commonly take loans against their shares or issue…

They could issue shares to raise capital. That shouldn't actually affect the stock price as now company is more valuable. Question is where to use this capital? Also currently debt is very cheap, so it might be simpler for them to take on debt.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#297

Post by Ekaros »

adventured wrote: post #258
dragonwriter wrote: post #206

Earlier quoted context omitted.

GDP per Capita is not a good measure of societal well-being either, since it doesn't reflect distribution of anything, just aggregate production.

It's an excellent measure of the typical societal well-being in fact. On average there is a strong correlation between the two globally and there has been during the entire post WW2 era at the least. It is the rare outlier that doesn't see a correlation between societal well-being and GDP per capita. Shall we stroll down the list of high GDP nations? Surely it's unnecessary, as we all know the names. Oh ok let's do i…

Hmm, actually I wonder the true level of quality of life difference between top of that list and bottom of it. Probably not great predictor inside the list.

Still I agree that between top and bottom there is huge qualitative differences.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#298

Post by MatteoFrigo »

JumpCrisscross wrote: post #148

“The report is more an illustration of how GDP calculations tend to be volatile from quarter to quarter, not necessarily indicating weakness in the economy or a sign of recession. The contraction was due to a jump in imports and a drop in exports, coupled with a slower buildup of businesses’ stockpiles. On a year-over-year basis, the economy grew 3.6%. Together, trade and inventories subtracted about 4 percentage poi…

I don't think the bloomberg explanation is right, because the net effect of imports on GDP is zero.

Assume you import $1 of goods, which are consumed. Then the GDP reflects $1 consumption (either private or government) minus $1 imports, for a net zero.

The goods may not be consumed immediately, in which case GDP counts $1 inventories minus $1 imports, still net zero.

The thing to remember is that GDP is domestic product, so anything produced abroad is irrelevant.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#299

Post by Ekaros »

HFguy wrote: post #212
lkxijlewlf wrote: post #166

Earlier quoted context omitted.

Some of it is from greed. Inflation is 8.5% but almost all the major food producers have raised prices by ~15%.

A lot of commodity inputs into food production are up way more than 8.5% (e.g., corn, wheat). And a lot of the farmers inputs (e.g., energy, fertilizer) are up more than 8.5%. The 8.5% is a weighted, blended average of a lot of things. So it could be reasonable that if you were selling bread, that the price would need to go up more than 8.5%. The question is whether their profit margins are up? I don't know.

Actually considering the price of wheat from price of bread even 10% increase probably isn't too much. But that doesn't mean there hasn't be similar cost increases in other parts of the chain from commercial bakeries to store and transport.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#300

Post by JumpCrisscross »

MatteoFrigo wrote: post #298
JumpCrisscross wrote: post #148

“The report is more an illustration of how GDP calculations tend to be volatile from quarter to quarter, not necessarily indicating weakness in the economy or a sign of recession. The contraction was due to a jump in imports and a drop in exports, coupled with a slower buildup of businesses’ stockpiles. On a year-over-year basis, the economy grew 3.6%. Together, trade and inventories subtracted about 4 percentage poi…

I don't think the bloomberg explanation is right, because the net effect of imports on GDP is zero. Assume you import $1 of goods, which are consumed. Then the GDP reflects $1 consumption (either private or government) minus $1 imports, for a net zero. The goods may not be consumed immediately, in which case GDP counts $1 inventories minus $1 imports, still net zero. The thing to remember is that GDP is domestic prod…

> the net effect of imports on GDP is zero

Correct [1]. Net exports is a non-zero component of GDP, but "the imports variable (M) correct[s] for the value of imports that have already been counted as personal consumption (C), gross private investment (I), or government purchases (G)" [2].

[1] https://fredblog.stlouisfed.org/2018/09/do-imports-subtract-...

[2] https://research.stlouisfed.org/publications/page1-econ/2018...

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