GDP Fails to Impress But Consumers Still Upbeat

First quarter GDP was revised down from from an initial estimate of 3.2% to a more paltry 2.7% annual rate of growth. While certainly better than the horrifying negative numbers we were getting during the depths of the crisis, GDP is hardly living up to the standards expected by the V-shaped recovery crowd. The V is turning into more of a W, which should be disappointing to anyone other than my Romanian relatives who could never tell the difference between a V and a W anyway.

While today's Michigan consumer confidence index was marginally higher than expected, (76 vs expectations of 75) one would think things were actually improving. I know that consumer sentiment is a leading indicator and GDP is lagging, but still, consumers don't seem to be living up to expectations. This is perhaps why the market has been hit lately. All that confidence doesn't seem to be translating into actual spending as consumer spending was revised down from 3.5% growth to 3.0%. This took the biggest bite out of GDP growth. On the bright side, corporate profits were revised higher, once again proving that it's much easier to make money when you don't have to pay a bunch of employees. Nevertheless, somebody is gonna have to buy products, so I'm not quite sure how we're going to get out of this conundrum.