Although the U.S. Bureau of Economic Analysis (BEA) reported on Tuesday that real gross domestic product (GDP) increased by a strong 4.3% year-on-year in the third quarter, economists David Rosenberg Calling headlines “fugazi.”
The president of Rosenberg Research believes that depleting government spending and savings mask underlying economic weakness, calculating that the “real” growth rate is only 0.8%.
Official data released by BEA showed that real GDP accelerated from 3.8% in the second quarter to 4.3% in the third quarter. The growth was driven primarily by consumer spending, exports and government spending.
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However, Rosenberg believes these numbers are misleading. “If you thought the CPI data was manipulated, so is today’s GDP report,” Rosenberg said on X.
He argued that once you strip out “sharp declines” in government spending, changes in import data and personal savings rates, the economy would barely expand. He singled out “flat growth in personal disposable income” as a red flag that contradicts an apparent consumer boom.
If you thought the CPI numbers were manipulated, so is today’s GDP report. Take out government, falling imports and a sharp decline in personal savings rates to support consumption (in the face of flat personal disposable income growth), and guess what? Real GDP growth is…
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The report sparked heated debate among analysts, who interpreted the same data through vastly different lenses. While Rosenberg believes unsustainable spending supports a hollow economy, Gordon Johnson Researchers at GLJ Research saw a terrifying nominal boom.
Johnson highlighted that nominal GDP (growth before inflation adjustment) surged 8.2% and the GDP price index read 3.8%, well above the Fed’s target.
“U.S. nominal growth is >8%…but the 10-year Treasury yield is only 4.17%?” Johnson questioned, arguing that the Fed’s current easing cycle is “encouraging the economy to overheat rather than cool” to see more inflation.
So… US nominal growth is >8%, the GDP price index is only 3.8% (much higher than expected), but the 10-year Treasury yield is only 4.17%? History shows that if nominal growth is >8%, 10-year yields should be higher. However, the Fed is implementing quantitative easing and cutting interest rates, and even encouraging… pic.twitter.com/s38RNWm81Z
