Skip to main content

Does real GDP growth signal recovery?

Over on Twitter this morning, The Kirk Report tweeted a link to a Wells Capital Management report that offers some upbeat news on prospects for economic recovery.

Here's an excerpt from that report entitled, "Current Real GDP Recovery Looks as Strong as 1975, 1982 Recoveries":

"Despite a strong fourth-quarter real GDP report, the debate surrounding the strength of the contemporary economic recovery lingers. Most seem to anticipate a subpar recovery similar to the last two during the early 1990s and after the dot-com meltdown in the early 2000s.

However, although the current recovery is only two quarters old, it is thus far closely tracking the strong recoveries of 1975 and 1982..."


There follows some interesting charts and data summaries which lead the authors to conclude that the current recovery, measured on real GDP growth, is much stronger than many had believed it would be.

I am happy to consider positive arguments for economic growth, but I'm also left to wonder how reliable these real GDP figures are, given the way we measure inflation statistics these days.

Tim Iacono at TMGM has a nice little chart that illustrates this relationship between real economic growth and inflation. Note how drastically the real GDP figures can change when inflation is overstated or understated.

For a more thorough discussion of why GDP figures are an unreliable and "heavily politicized" data point, please see this post on John Williams' Shadow Stats report on 4th quarter GDP.

Added notes: this blog post from the Daily Kos site offers an upbeat outlook on the GDP numbers and jobs recovery, similar to the Wells Capital report. What are your thoughts?

Popular posts from this blog

Seth Klarman: Margin of Safety (pdf)

Welcome, readers! Signup for free email updates at the Finance Trends Newsletter . Update: PDF links removed due to DMCA notice. Please see our extensive Klarman book notes below. New visitors, please check the Finance Trends home page for all new posts. Here's something for anyone who has been trying to get a look at Seth Klarman's now famous, and out of print, 1991 investment book, Margin of Safety .  My knowledge of value investing is pretty much limited to what I've read in Ben Graham's The Intelligent Investor (the book which originally popularized the investment concept of a "Margin of Safety"), so check out the wisdom from Seth Klarman and other investing greats in our related posts below. You can also go straight to Ronald Redfield's Margin of Safety book notes .    Related posts: 1. Seth Klarman interviews and Margin of Safety notes     2. Seth Klarman: Lessons from 2008 3. Investing Lessons from Sir John Templeton 4.

Moneyball: How the Red Sox Win Championships

Welcome, readers . T o get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter .   The Boston Red Sox won their fourth World Series title of t he 21st century this we ek. Having won their first Se ries in 86 years back in 200 4, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it? Quick background: in late 2002, team own er and hedge fund manager, John W. Henry (with his partners ) bought the Boston Red Sox and its historic Fenway Park for a reported sum of $ 695 million. Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship. This brings us to one of my fav orite scenes from the 2011 film , Moneyball , in which John W. Henry (played by Ar liss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pi

William O'Neil Interview: How to Buy Winning Stocks

Investor's B usiness Daily founder and veteran stock trader, William O'Neil share d his trading methods and insights on buying winning stocks in an in-depth IBD radio interview. Here are some highlights from William O'Neil's interview with IBD: William O'Neil's interest in the stock market began when he started working as a young adult.  "I say many times that I didn't get that much out of college. I didn't have much interest in the stock market until I graduated from college. When I got married, I had to look out into the future and get more serious. The investment world had some appeal and that's when I started studying it. I became a stock broker after I got out of the Air Force."    He moved to Los Angeles and started work in a stock broker's office with twenty other guys. When their phone leads from ads didn't pan out, O'Neil would take the leads and drive down to visit the prospective customers in person.