I was so busy talking about how the government would juice the final employment numbers just a few days before the presidential election, that I completely overlooked the third quarter GDP report.
Well…surprise, surprise. Everyone thought third-quarter GDP would print 1.8%, but somehow we achieved an even 2%.
So, where’s the decimal point?
Much like the tooth fairy that appears from nowhere and deposits money under your pillow for a fallen-out tooth (it used to be 25¢, but with inflation I’m uncertain how much money to expect these days), the government has waved its magic wand, and voilà, it’s 2%.
Again, where’s the decimal point? Fortunately, for the current administration, GDP revisions will not occur until months after the presidential election.
Remember, second-quarter GDP came in at 1.5%, revised up to 1.7% (hooray, hooray), and then settled at 1.25% (boo!)
However, nobody really pays attention to the revisions, so from a public relations perspective it’s very important to get the GDP number right the first time.
Yes, I’m still searching for that elusive decimal point. Uncle Sam, coincidently, decided to contribute one-third to GDP in the third-quarter, something we haven’t witnessed since the second-quarter of 2010.
Much like the birth/death statistics, the new-home seasonal adjustment, or even the unemployed deletions, government contrived numbers are definitely the reality of the day. With that said, couldn’t Barack’s boys have taken a page from Madison Avenue when it comes to pricing?
Rather than pay $10.00 for an item, we all know that it feels so much better to pay just $9.99. And we don’t hurt as much at the gas pump if the price is $3.99, as opposed to $4.00.
Indeed, one of the basic rules of pricing is to never use a round number, because psychologically, it’s considered to be very damaging. Speaking of human emotions, consider this example.
If a baseball player achieves a .299 batting average for the season, he’s content.
Yet, if he hits .300, his contract will jump significantly, putting a big smile on his face. Nevertheless, compared to the player who hits .301, there’s no contest.
Essentially, a .300 average means just squeaking by .299, and though it’s very good, it leaves a bit of doubt whether a .300 average can ever be achieved again.
On the other hand, a .301 batting average psychologically puts the player in the .300 club, leaving little doubt about the next season.
Consequently, if the government official who contrived this most recent tooth fairy GDP number was really doing his job correctly, we would have seen a GDP of 2.1%.
Therefore, I’ll ask the government once again, where’s the all-important decimal point?
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for July 24th, 2014 | John Ransom
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