GDP is UP

Feb. 4, 2014
Fourth-quarter 2013 GDP was released by the government recently, and the data looks good, but there are still areas to watch for in 2014.

Fourth-quarter 2013 GDP was released by the government recently, and the data looks good. GDP (adjusted for inflation) is at a record high. The "record high" comment is for anyone who still thinks the recovery from the Great Recession is incomplete. The fourth quarter came in 2.7% higher than one year earlier. The average year-over-year growth rate for the past decade is 1.8%, so the posted gain is really pretty good.

The unemployment rate is down to 6.7%; although the labor participation rate is also down, partially offsetting this good news. Retail sales (adjusted for inflation) are rising fast enough through December to indicate that the economy is going to continue to grow. However, we continue to expect that the rate of growth will diminish in the second half of 2014.

We are already seeing where the extraordinary growth in the housing market is losing momentum. Coupled with the less-than-stellar performance of the stock market in January and some rate-of-change weakness in several leading indicators, we see the stage set for a first half of 2014 that is stronger than the second half of the year. This will make for an interesting scenario regarding further Fed tapering (a second stage of the tapering was announced recently).

So far the bond market has not acted adversely, and the stock trend is no worse than it was prior to the announcement. This suggests that we will likely see additional tapering announcements over the next several months, if not quarters. Furthering tapering by the Fed in the second half of 2014 is not a "given" since the economy will be noticeably decelerating.

We view the tapering and non-reaction by the markets as positive. The sooner the Fed gets out of the business of creating money out of thin air, the sooner we can relax a little about just how much general price inflation potential is being "stored" in the economy when fuller employment numbers arrive in 2016 and 2017.

About the Author

Alan Beaulieu Blog | President

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and 60 years of correct calls. In his keynotes, Alan delivers clear, comprehensive action plans and tools for capitalizing on business cycle fluctuations and outperforming your competition--whether the economy is moving up, down, or in a recession.

Since 1990, he has been consulting with companies throughout the US, Europe, and Asia on how to forecast, plan, and increase their profits based on business cycle trend analysis. Alan is also the Senior Economic Advisor to NAW, Contributing Editor for INDUSTRYWEEK, and the Chief Economist for HARDI.

Alan is co-author, along with his brother Brian, of the book MAKE YOUR MOVE, and has written numerous articles on economic analysis. He makes up to 150 appearances each year, and his keynotes and seminars have helped thousands of business owners and executives capitalize on emerging trends. 

Prior to joining ITR Economics, Alan was a principal in a steel fabrication company and also in a software development company.

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