Economic Growth: Price spikes that do not kill us make us stronger?
By Adam Lass
In this article
The White House has downgraded 2007 GDP growth to 2.3%.
Council of Economic Advisers Chairman Edward Lazear is not clear as to whether the housing market has bottomed yet.
Lazear is “pleased” that we have “survived” the oil price spike.
Economic Growth: Price spikes that do not kill us make us stronger?
Today the White House released what it probably figures is a leading indicator when Council of Economic Advisers Chairman Edward Lazear told reporters via his “troika” teleconference that gross domestic product would likely grow by 2.3% from 2006 Q4 to 2007 Q4.
In case you are curious, that's a bit of a downgrade from its previous projection of 2.9%. Why the slightly glummer outlook? It seems that someone at CEA finally noticed that the first quarter of 2007 was a real stinker.
As regular readers know (but apparently Lazear just figured out), GDP growth of late has been sooo slow (come on, say it: “How slow was it, Johnny?”), that we could very well have been moving backwards for all we know.
Indeed, the last time we saw “growth” like this was the bottom of the “great tech crash” in 2002. On the other hand, Lazear reminds us several times during the broadcast that the White House remains very proud of the fact that the economy grew 3.1% in 2006, and estimates that we will grow at that exact same rate in 2008 and 2009.
Unless, of course we don't. There is, after all, the fallout from that pesky housing market. Here, Lazear is not quite straight yet: “So it is just not quite clear where we are in terms of the housing market, whether it has bottomed out.”
Oh wait, there's also the energy price thing. Here, the president's advisors are pleasantly surprised: “Because of the robustness of the U.S. economy we've actually been able to survive high energy prices without a great deal of economic shock.”
Surviving is nice, but I don't really know if it counts as a leading indicator, beyond a sort of Nietzschean “costs that don't kill us make us stronger” sense.
Unfortunately, while we are not dead yet, we are certainly not healing particularly well, and while all the president's men including both current CEA Chairman Lazear and former CEA Chairman (and current Fed Chairman) Bernanke both hint that for reasons unnamed, things are about to turn around at any moment, they have consistently postponed that moment from “now” to “really, really soon.”
But quite possibly not soon enough to prevent a recession.
***
Adam Lass is the founder and manager of the WaveStrength Group, and is a contributing editor for Taipan Financial News. As the creator of WaveStrength's proprietary analysis system, Adam's expertise has shaped a franchise of successful investment newsletters and services, including WaveStrength Options Weekly and WaveStrength Apex.
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Related Resources
Press Briefing: Council of Economic Advisors Chairman Ed Lazear Via Teleconference, June 6, 2007.
The Fed: Chairman Ben S. Bernanke on housing market and subprime lending (via satellite from the 2007 International Monetary Conference, Cape Town, South Africa).
MSNBC: Wall Street slammed by rate worries.