JACKSON HOLE, Wyo. -- There will be no porno here.
I just didn't want you to see a boring title and bolt.
Now pay attention.
We can make a good guess as to what one of the key components of the
gross domestic product
number to be released tomorrow will show right now.
The GDP numbers: Join the discussion on
Investment accounts for roughly 16% of GDP; it comes in the
form of business inventories, residential buildings, commercial buildings and what the government calls
producers' durable equipment
PDE is commonly known as plain ole business investment; it accounts for roughly 52% of total investment and roughly 8.3% of GDP.
PDE comes in the form of aircraft (roughly 4.5% of the total); motor vehicles (roughly 19.5% of the total); and "all else" (roughly 76%) -- information processing and related equipment (including computers and peripheral equipment) and industrial equipment.
release contains a series called "nondefense capital goods shipments excluding aircraft" (or NDCGSEA) that serves as an excellent proxy for the "all else" portion of PDE. Combining those figures with recent aircraft and motor-vehicle numbers produces a pretty good PDE guess.
A third-quarter estimate -- along with some recent history -- appears in the table below.
Cool? Cool. Three notes.
(a) Go Dog Go.
NDCGSEA just posted their biggest quarterly increase since the fourth quarter of 1993. This virtually guarantees (because of their huge weighting) a double-digit PDE increase.
The weighted-sum approach highlighted here sometimes misses big. PDE rose during the first quarter of this year, for example, despite the fact that all three of the things we use to predict it were pointing to a decrease; PDE fell during the fourth quarter of 1997 despite the fact that our construct was predicting a 1.6% gain.
Still, the actual change in PDE almost always exceeds what the weighted sum predicts: It has done so in eight of the 10 instances shown in the table, and neither of the failures (one during the third quarter of 1998 and one during the final quarter of 1997) came in the face of a double-digit increase in NDCGSEA.
Look for a big PDE number tomorrow.
(b) And look for an even bigger one on a real basis.
The numbers in the table above are nominal (as opposed to real) -- they are not adjusted for price changes.
A real variable is simply its nominal counterpart divided by an appropriate price level, and your narrator guesses that the PDE price index fell 0.8% (its average decrease over the prior three quarters) during the July-August-September period.
This translates into a 17.2% real PDE increase -- and a 1.3-percentage-point contribution to the overall GDP number.
(c) Take me to the river.
Orders during one quarter generally predict shipments during the next.
Orders for NDCGEA posted a 26.8% increase during the third quarter -- their biggest three-month gain since the final quarter of 1993.
And so you know what?
The tired-ass notion that the central bank and the slowdown hopefuls have been trotting out for a few years now -- business investment will die nextmonthIswear -- is the same as it ever was.
Come on, you New York sissies. Load up on whisk brooms. Send October retail sales soaring.
And ack!! Now the damn
thing will print seven-tenths for sure.
Fire Jim Gray. Now.
Open the door. Let him in.
Probably betting on Atlanta.
The Chad Curtis snub rocked.
Way less of a scumbag than Clinton.