EconomicsUSA: Recovery growth: From an estimate of 3.2% growth in 4th Quarter (ending in Dec), figure slides to 2.8%

Washington Post (Feb25,2k11)

A learnèd projection had forecast that the final fiscal Quarter for 2k11 -- the months of October, November, thru the end of December (which included the entire shopping marathon leading up to Christmas and post-Christmas bargain sales) -- woud amount to a modest 3.2% gain in the nation's economic growth.  As the real-life after-the-fact statistics cawt up with the previous forecasts, we now have learned that we're four decimal points short on what the economists had predicted.  For a population as large as that of the USA, the "missing" four points -- down from the forecast 4.2% to the actual 2.8% -- especially given that we're talking about the last Quarter of the previous year 2k10 -- is a shock.  The down-guaging will domino onto previous forecasts for the end of the current Quarter, the first of 2k11, which ends in a month's time.

A new factor has come full force onto the scene of America's ecnonomic forecasting:  the states of the Union and cities and towns of all population sizes are marked by a orevailing pattern of overloads of obligations and debts.  WaPo informs us today in a report by Jeannine Aversa (AP):

State spending cuts slow US economic growth in Q4

VIDEO

U.S. GDP Grew 2.8% in Fourth Quarter, Revised From 3.2%

Feb. 25 (Bloomberg) -- The U.S. economy grew at a 2.8 percent annual rate in the fourth quarter, slower than previously calculated and less than forecast as state and local governments made deeper cuts in spending. The revised increase in gross domestic product compares with a 3.2 percent estimate issued last month and a 2.6 percent gain in the third quarter, figures from the Commerce Department showed today in Washington. Bloomberg's Betty Liu reports. (Source: Bloomberg)

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By JEANNINE AVERSA

The Associated Press
Friday, February 25, 2011; 10:28 AM

WASHINGTON -- Deeper spending cuts by state and local governments weighed down U.S. economic growth in the final three months of last year. 

The government's new estimate for the October-December quarter illustrates how growing state budget crises could hold back the economic recovery. 

The Commerce Department reported Friday that economic growth increased at an annual rate of 2.8 percent in the final quarter of last year. That was down from the initial estimate of 3.2 percent. 

The weaker figure was dis-appointing and prompted some economists to lower their fore-casts for economic growth in the current January-March quarter. 

State and local governments, wrestling with budget shortfalls, cut spending at a 2.4 percent pace. That was much deeper than the 0.9 percent annualized cut first estimated and was the most since the start of 2010. 

Consumers spent a little less than first thought. Their spending rose at a rate of 4.1 percent, slightly smaller than the initial estimate of 4.4 percent. Still, it was the best showing since 2006. And it suggests Americans will play a larger role this year in helping the economy grow, especially with more money from a Social Security tax cut.

But the failure of the over-optimistic forecasts by the wide ranks of learnèd economists in regard to the overburdened lower two tiers of government is not the only factor now in play for the end of the coming first Quarter 2k11.  Rather, the dynamics of the Arab Revolutions must now be factored in, as well.  The Arab Revolutions are shaking the always-uneasy balance in world oil prices.  While the Saudi Oilgarchs have made strenuous efforts to convince the world, in the wake especially of the Libyan Revolutionary uprising,  at the same time the Saudis are on massive alert and are building up their operational security forces becawz even they have no guarantee that the Days of Outrage called for a month from now, will leave their oil production facilities functioning at full tilt.  Any interference with Saudi production that slowed the outflow from the Kingdom is improbable, but no longer a madman's hallucination.  The issue then is how investors and commodity-futures traders will shift some of their spendable funds into other commodities and industries.

The hot-millions financial newsletters are now touting coal for energy worldwide (Money Matters), not betting on the green movement for sustainable renewable energy forces; more widely, the apparently incredible investment field of Mongolian mining in copper, gold, and rare metals is currently gaining attention from the mainstream business media.  Anyone with sufficient financial resources can pull funds out of oil futures and divert them to mining, a global industry with many locales where labour is abundant and cheap, seams of various commodities well-identified and governments welcoming.  Such a movement of capital woud drive up the futures prices in a major inflationary trend, as country's which have abandoned coal, for instance, and with huge oil-transport and -pipelines in place will be committed to buying oil and signing deals for oil supplies from now thru next winter. In this latter regard, I'm thinking of deals made between the Russian oil suppliers and Europe East and West, the Russians woud have no problem breaking existing agreements if a shortage offers the prospect of rising oil prices worldwide.

-- EconoMix