The headline real GDP number of 2.8% does not sound too bad until you dig beneath the surface. A full 1.9 percentages points of that 2.8% was inventory replenishment. Real GDP vs. a year ago is +1.6% and that is on a recession track as well.
Five-Year Treasury Yield Hits Record Low
Bloomberg reports Treasury Five-Year Yield Declines to Record Low as GDP Misses Forecast
Yield Curve over TimeTreasury five-year note yields fell to a third consecutive record low after slower-than-forecast U.S. growth added to speculation the Federal Reserve will expand asset purchases to spur economic growth.
Ten-year note yields fluctuated as stockpile rebuilding accounted for 1.9 percentage points of the 2.8 percent economic expansion, sparking concern growth may be weaker than expected in the first three-months of this year. Fed Chairman Ben S. Bernanke said Jan. 25 he’s considering additional bond purchases to boost growth after the Federal Open Market Committee announced that the target lending rate would stay low through late 2014.
In contrast to popular belief, recessions typically start with GDP in positive territory. As you can see, Real GDP vs. a year ago is +1.6% and that is consistent with a recession track.As the chart illustrates, the latest YoY real GDP, at 1.6% is up from last quarter's 1.5% (to two decimal points it's 1.56% versus 1.46% for Q3). At 1.6% the YoY number is below the level at the onset of all the recessions since quarterly GDP was first calculated — with one exception: The six-month recession in 1980 started in a quarter with lower YoY GDP (at two decimal places it was 1.42% versus today's 1.56%). And only on one occasion (Q1 2007) has YoY GDP dropped below 1.6% without a recession starting in the same quarter. In that case the recession began three quarters later in December 2007.
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