More Poorly Done Economic Reports

Last night, I discussed the MSN mutual fund scandal article and how it was full of mis-statements and manipulations. Tonight, it is Reuters distorting the economic truth.

The 7.2% growth rate in GDP posted during the third quarter was unsustainable at this time. But 4% is not a bad number. If we could keep the economy growing at a steady 3-4% we would be doing fine. Is it a slowdown from the 7.2%? Yeah. But it is a slowdown to reality.

Really, out of everything I see here, the only really concerning items were the spike in food prices and the corresponding spike in wholesale prices.

Food is an inelastic demand. People always have to eat and it is unlikely that we will significantly change our food purchasing habits to help buy that new refrigerator, TV, or car. A sustained rise in food prices will lead to a permanent reallocation of spending away from consumer goods. This is a long term concern.

The other thing that I'd want to keep an eye on is the spike in PPI. If it is a one time spike, like the market is assuming, then it's no big deal. But if PPI persists at this new, higher level, we're going to see more companies struggle. We'll also eventually see the CPI numbers following suit and rising, which introduces the specter of inflation to the equation again (didn't think I'd be talking about that bug-a-boo so soon again). Again, though, this is a long term concern.

The most important thing right now is that the economy is still growing at a decent clip. We've got to find a way to keep the economic tide flowing in the right direction.

Things still aren't great, but they're also not as bad as the doomsayers would have you believe, either. Keep everything in perspective. Just because GDP growth may be slowing down does not necessarily mean that we are heading into a failure of the recovery.