The Commerce Department is confirming the worst fears of the economic worrywarts. Gross domestic product for the fourth quarter of 2012 came in negative rather than positive. This headline news almost certainly will dominate the headlines today as it poses a risk to the multiyear jobless recovery we have witnessed.
The headline GDP came in at -0.1%, lower than the Bloomberg and Dow Jones consensus of 1.0%. It is also worth noting that Bloomberg showed a range of 0.5% to 2.6% for the headline GDP. Yep, GDP was worse than every single economist was predicting. This is bad news, and with the economic readings being soft most of this month, it may give those who fear the next recession (or a double-dip recession, even though it is too late for that term to be used) some extra ammunition to back up their bearish case.
The good news is that this is a preliminary number that will be revised twice, so maybe the bean counters just missed a few widgets here and there. The GDP Price Index rose by 0.6%, the core PCE was up 0.9% and the domestic purchases price index was up 1.3%.
Despite the negative headline news, the numbers may not be all that bad. The decline in federal spending was the largest drop since 1973, with the drop in all government spending coming in at 6.6%. If you look at real final sales, that figure was up by 1.1% in the fourth quarter. Personal consumption figures also rose by 2.2%.
Today’s news broke a 13-quarter streak of expansion. Want to know what this means for stocks and bonds? Stocks are near 14,000 on the DJIA and are still likely headed higher than our initial 2013 DJIA price target of 14,590.