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The US economy shrank at an annualized rate of 2.9 percent in Q1

washingtonpost.com

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Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#21

Post by pyre »

mikeash wrote: post #17

Can anybody who understands this stuff better than I do comment on the winter weather factor? To me, the "winter sucked" excuse sounds like complete BS, a transparent lie along the lines of, "Well, I just didn't want to order the tide to stop right now." This is a massive change (down a total of 7% or so from two quarters prior) and surely the weather, while unusual, wasn't that strong. But maybe it really is a big f…

Well, the effects of the winter can be:

- Damage due to harsh weather causing a net drag on businesses, causing them to be more conservative with spending.

- All of the store, school, etc closures due to inclement weather.

- Even without store closures, many people are less likely to leave their homes (i.e. spend money) when the weather is bad, even if the weather isn't 'snow day' bad.

I feel that it's probably unlikely to be entirely due to the weather, but I don't think that we can discount the effects a harsh winter can have.

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#22

Post by maerF0x0 »

Seems to me the idea of declaring a shrinking economy in terms of $ doesnt make sense. What if the average price of things is dropping (eg Healthcare)?

To me it seems the goal should just be how much stuff did we make? If that number went up, then good (except corn).

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#23

Post by jiggy2011 »

maerF0x0 wrote: post #22

Seems to me the idea of declaring a shrinking economy in terms of $ doesnt make sense. What if the average price of things is dropping (eg Healthcare)? To me it seems the goal should just be how much stuff did we make? If that number went up, then good (except corn).

How would you define "stuff" and "make"? Especially with regards to financial services etc.

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#24

Post by pessimizer »

maerF0x0 wrote: post #22

Seems to me the idea of declaring a shrinking economy in terms of $ doesnt make sense. What if the average price of things is dropping (eg Healthcare)? To me it seems the goal should just be how much stuff did we make? If that number went up, then good (except corn).

>Seems to me the idea of declaring a shrinking economy in terms of $ doesnt make sense. What if the average price of things is dropping (eg Healthcare)?

We know what inflation is, and that the price of healthcare is not dropping.

>To me it seems the goal should just be how much stuff did we make? If that number went up, then good (except corn).

We also know about the trade deficit: http://www.businessinsider.com/us-trade-balance-march-2014-2...

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#25

Post by pessimizer »

A stock market recovery is not a "recovery."

Prime-age employment: http://data.bls.gov/timeseries/LNS12300060

Median wealth, and the median wealth of various segments: http://finance.yahoo.com/blogs/daily-ticker/for-most-familie...

Median income: http://advisorperspectives.com/dshort/updates/Median-Househo...

Wealthy people cannot drive consumption, because they spend a far smaller part of their income on it.

edit: I intentionally use the prime age employment rate (as is convention of late) in order to avoid objections that the low employment rate is the fault of a large segment of baby boomers retiring.

The general numbers look worse, not better: http://data.bls.gov/timeseries/LNS12300000

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#26

Post by conistonwater »

clintonc wrote: post #16
sp332 wrote: post #2

The economy shrank at an annualized rate of 2.9% over one quarter. That's 2.9% / 4 ~= 0.7% in Q1.

Math pedant to the rescue! Actually, rates combine in a multiplicative way -- losing 3% and then 4% does not lose 7%, (though it's close). What if the economy lost 1% each day for a year? It would not lose 365%. If we assume the annualized rate, the economy would be 97.1% of its current size in a year. The fourth root is 99.267%, so the economy shrank about 0.733% this quarter. If it does so for four consecutive quar…

Math pedants of the world:

If you calculate 1-(1-x)^(1/4), the difference between the true answer and x/4 is approximately 3 * x^2/32. For a figure of y percent, this is a relative error of 0.375 * y percent. Ignore it when y is small.

The GDP figure is only known to something like 1 or 2 decimal places.

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#27

Post by bengali3 »

maerF0x0 wrote: post #22

Seems to me the idea of declaring a shrinking economy in terms of $ doesnt make sense. What if the average price of things is dropping (eg Healthcare)? To me it seems the goal should just be how much stuff did we make? If that number went up, then good (except corn).

Do you mean the total creation of goods in the US? To compare apples to oranges (literally) we compare their dollar values and call it GDP. comparing the 'count' of things wouldn't be as useful as we could make a whole bunch of things that no one wants and call it productivity.

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#28

Post by [deleted] »

conistonwater wrote: post #26
clintonc wrote: post #16

Earlier quoted context omitted.

Math pedant to the rescue! Actually, rates combine in a multiplicative way -- losing 3% and then 4% does not lose 7%, (though it's close). What if the economy lost 1% each day for a year? It would not lose 365%. If we assume the annualized rate, the economy would be 97.1% of its current size in a year. The fourth root is 99.267%, so the economy shrank about 0.733% this quarter. If it does so for four consecutive quar…

Math pedants of the world: If you calculate 1-(1-x)^(1/4), the difference between the true answer and x/4 is approximately 3 * x^2/32. For a figure of y percent, this is a relative error of 0.375 * y percent. Ignore it when y is small. The GDP figure is only known to something like 1 or 2 decimal places.

[deleted]

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#29

Post by btilly »

mikeash wrote: post #17

Can anybody who understands this stuff better than I do comment on the winter weather factor? To me, the "winter sucked" excuse sounds like complete BS, a transparent lie along the lines of, "Well, I just didn't want to order the tide to stop right now." This is a massive change (down a total of 7% or so from two quarters prior) and surely the weather, while unusual, wasn't that strong. But maybe it really is a big f…

Let's run some fake numbers to see.

A quarter is roughly 91 days. About 65 of which are week days, and that is where most economic activity happens.

Suppose that bad weather costs you 30% of economic activity in half the country for just one of those week days. That works out to losing 0.23% of the quarter's economic activity. But we are using a quarter to estimate annual growth, so that now looks like losing 0.92% annualized growth. From one day of disruption over part of the country.

As you see, blip from a bad winter storm on the East Coast really can cause the economy look like it is headed in a much worse direction than it is for a quarter.

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#30

Post by lotsofmangos »

maerF0x0 wrote: post #22

Seems to me the idea of declaring a shrinking economy in terms of $ doesnt make sense. What if the average price of things is dropping (eg Healthcare)? To me it seems the goal should just be how much stuff did we make? If that number went up, then good (except corn).

Why do you think a rise in corn production is bad?

Also, in what units are you going to measure the total amount of stuff made, if not in currency?

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