A Closer Look at Real Growth and Profits

Is this a soft landing? Hardly. Despite weakness in the housing sector, the overall economy appears to be humming along on trend. Heck, last quarter wasn't even a trip into the slow lane, at least according to the advance gross domestic product data!

Last week, advance GDP numbers for the fourth quarter of 2006 showed 3.5% headline real growth, a tick above the trend of the past three years and well above the consensus estimate of 3.1%. If we roll up our sleeves and dig into the numbers, we see some interesting facts.

The first table below shows the fourth quarter's annualized percentage growth, along with the 12-quarter median reading and width of 1 standard deviation (1SD) over the past 12 quarterly readings. (1SD measures the volatility of the series, telling us how wide a range from the median would include 68% of all cases. So, for instance, Line 1 below, which printed at 3.5%, has a 12-quarter median of 3.4%. And it's likely that about 68% of the time it would print within 1.0% of that level, between 2.4% and 4.4%.)

I've highlighted in green and red, respectively, all the readings that fall above and below 1SD from the median. So green fields are unusually strong readings, and red fields are unusually weak readings.

Source: TheAgileTrader

Real GDP (Line 1) was a tick above the 12-quarter median. Personal consumption (Line 2) was somewhat strong. Consumption of nondurable goods (Line 4) was notably stronger than the trend. Gross private domestic investment (Line 6) was terribly weak, mainly on the sharp drop in residential investment.

Exports (Line 13) were somewhat strong on sharp growth in services exports (Line 16). Imports were well below the trend, mainly on a decline in goods imports (declining oil prices). And finally, government spending (Line 20) was elevated, most especially on a precipitous rise in defense spending (Line 22).

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At the time of publication, Oliensis had no positions in any stocks mentioned, although positions may change at any time.

Adam Oliensis is president of Dog Dreams Unlimited, a guaranteed introducing futures brokerage, and editor of the trading service The Agile Trader. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Oliensis appreciates your feedback; click here to send him an email.