Don’t Get Your Hopes Up for Q4 GDP (Audio)

Everybody is talking about how strong the United States economy is based upon the upward revision of GDP growth to 5% in the third quarter. In his latest podcast, Peter Schiff digs into the data underlying the third-quarter GDP, as well as the economic data that could tell us what to expect for fourth-quarter GDP growth.

Highlights from Peter’s podcast:

“Let’s look at this GDP number… Where did the upward revision come from? The revision was mainly due to an extra 1% increase in consumer spending. So consumers were spending a lot more money in the third quarter than we were originally led to believe. What did they spend their money on? A little over two-third of it was on Obamacare, health care expense. Is the economy really bigger because a bunch people paid for Obamacare at gun point, basically? I think most Americans would rather have that money to spend on something other than Obamacare. But the fact that they had to spend all this extra money on a government-mandated program doesn’t really mean the economy is bigger. Of course, these are one-time gains that are not going to be in future GDP numbers… By next year, there isn’t going to be a net-benefit to GDP from Obamacare…

“A big component of the Q3 number was the big increase in inventories. Companies are anticipating a big recovery… They are preparing for it by loading up on merchandise that they think they’ll be able to sell. Well, if they’re wrong [and] they end up with merchandise they can’t sell, because their customers are too broke to buy it, that is going to act as a big drain on the GDP numbers we get next year…

“The third quarter ended a couple months ago. All the data that’s come out since then… Almost all this data has been bad, way below expectations… The fourth quarter would look to be a significant reduction. Down to maybe the low 2’s, and maybe even below. We’ll see. That would be a significant deceleration in GDP growth going into 2015…”

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