LaSalle Economics’ Malanga: Drop in Exports ‘Disturbing’

Wednesday, 30 Jan 2013 01:42 PM

By Michael Kling

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Although the size of the gross domestic product (GDP) contraction was surprising, what’s really “disturbing” is the drop in exports, Vincent Malanga, president of LaSalle Economics, told The Wall Street Journal.

Exports decreased 5.7 percent in the fourth quarter, compared with an increase of 1.9 percent in the third quarter, according the Commerce Department.

The drop in exports is probably the most disturbing news since it’s an offshoot of demand falling overseas, particularly in Europe, he said. “And that doesn’t look to be reversing at any time soon.”

Editor's Note: The Final Turning Predicted for America. See Proof.

GDP fell 0.1 percent in the fourth quarter and rose 2.2 percent for the entire year, the Commerce Department reported.

“It was a surprise in terms of the amount of the decline,” Malanga said.

“Certainly this [GDP] number today certainly puts the fear of God into the Fed’s decision making,” he said, predicting the Federal Reserve will continue its asset-purchase program to maintain low interest rates “for as long as the eye can see.”

Malanga said he doesn’t believe the economy was as weak in the fourth quarter as the economic figures suggest, nor as strong in the third quarter as the previous numbers indicated.

“I think the truth probably lies somewhere in between at about 1 ½ percent.”

Malanga and other observers blame a large drop in military spending for the fourth quarter decline.

“Government spending was inordinately in the summer, and now we’re getting repaid for that,” he told The Journal.

Some experts say the economic data has several positive points, despite the unexpected GDP drop.

Consumer spending was up 2.2 percent in the fourth quarter, compared with 1.6 percent in the third quarter. Business investment saw an annualized 8.4 percent increase after a 1.8 percent decline in the third quarter. Residential investment was up 15.3 percent, pointing to a rebounding housing market.

The report “does nothing to shake our view that GDP will shift into the 2.5 percent to 3 percent range over the second half,” wrote Eric Green, an economist at TD Securities, according to TheStreet.com

Editor's Note: The Final Turning Predicted for America. See Proof.

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