Here is a brief snapshot:

  • 4q 2009 US GDP was revised up from +5.7% to +5.9%. That’s a welcome change from continual lowering of GDP data (though there is one more revision to come in another month). Unfortunately most of the gain -almost 4%- came from a tepid inventory rebuild. Because of how GDP is calculated, if inventories are being drawn down radically in one quarter, then tread water the next quarter, that is counted as GDP growth. Inventory rebuilds are a good thing but can be fleeting/short term and end up not contributing to GDP growth on an sustained basis.
  • US bank lending is contracting at the fastest rate since 1942.
  • FDIC says over 700 US banks are at risk of failing (16 year high)
  • more than 5% of loans are 3 months or more past due (26 year high)
  • over 11M US households have negative equity on their home -almost 25% of houses with mortgages. 5M of these are underwater by 25% or more. This is a statistically significant figure in that 25% underwater is a point where a high portion of borrowers give up and stop paying their mortgage.
  • Ben Bernanke indicated in Senate Finance Committee testimony (Feb 24th) that the US economy is very weak and that interest rates will remain low “for an extended period”.
  • Consumer sentiment is at a 27 year low.
  • Gallop says 19.9% of American workers are underemployed (willing and able to work full time but can’t find full time work). Thats 30M Americans.
  • We have deflation for the first time in 28 years.
  • New home construction is hitting an all-time low. And consider that there is a new home buyer tax credit in place while we hit these lows. The median price for a new house is now $203.5K – back to December 2003 prices.
  • Wal Mart has lowered earnings expectations. Some view this as a proxy for US consumer spending forecasts. The US consumer remains 70% of GDP.
  • over the long term, roughly 18% of US GDP comes from government spending. It is now up to 25%. Thus, we’ve got a 7% boost to GDP from short term government spending (that we will have to pay for yet). Keep that 7% boost in mind when you consider 5.9% GDP growth for 1 quarter.
  • Since the US economy is highly inter-connected in a global economy, it may be worth a quick view (below) of how strong the economic recovery is in the overall “advanced economies”.

CPI

So perhaps it should come as no surprise that for the first time in decades, the US is seeing deflation. (with thanks to The Economist)