Monday, August 30, 2010

Nate Silver, Hero to Geeks

If you use to follow and wonder now where it went, Nate inked a deal with the NYTimes to incorporate the blog. Ok, interesting enough.

In his latest post, Silver argues that all of the inflated journalism surrounding the lowered GDP estimates is more playing to the double dip narrative and less fact.   If you haven’t followed the news, the latest estimate for GDP quarter growth was reported as less than stellar.  In fact, some looked at it and said it was indicative of a double dip recession.  Reporters were practically drooling to release the news as it played to the Obama isn’t doing enough story.  What Silver argues though, is that the numbers are skewed by two factors.  Overall, demand is up and most factors are positive.

So what is the truth behind the revision.

1) State and local government spending is down.  This we knew.

2) Imports are up dramatically.  In fact, most of the increase in domestic demand is being fed by imports, which are cheaper.  And imports minus exports is an adjustment to GDP.  But why the surge in imports?  US manufacturers have been trimming their inventories and their capacities in the wake of the Great Recession.  And foreign importers are lowering prices to keep and attract buyers.  So with cheap foreign goods available, distributors are looking overseas to restock their inventories.

What this means is that gross domestic product might be down, but demand is healthy. 

So don’t panic yet.  And say something nice to a geek today. And make sure you check behind the curtain.

No comments:

Post a Comment