Digging beneath the surface there is nothing to cheer about in the GDP numbers. Moreover, this weakness is in the face of the largest stimulus measures the world has ever seen, not just in the US, but globally. Money supply in China is growing at 30% and housing bubbles are likely to pop in Australia, Canada, and the UK. Problems in Greece, Spain, and Iceland continue to mount.
GDP is a mirage of sand blowing in the wind. So is global growth. It is a mistake to believe government spending can possibly provide a solid foundation for a lasting recovery.
Jan. 30 (Bloomberg) — New York University Professor Nouriel Roubini, who anticipated the financial crisis, called the fourth quarter surge in U.S. economic growth “very dismal and poor” because it relied on temporary factors.
Roubini said more than half of the 5.7 percent expansion reported yesterday by the government was related to a replenishing of inventories and that consumption depended on monetary and fiscal stimulus. As these forces ebb, growth will slow to just 1.5 percent in the second half of 2010, he said.
“The headline number will look large and big, but actually when you dissect it, it’s very dismal and poor,” Roubini told Bloomberg Television in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland. “I think we are in trouble.”
Roubini said while the world’s largest economy won’t relapse into recession, unemployment will rise from the current 10 percent, posing social and political challenges.
“It’s going to feel like a recession even if technically we’re not going to be in a recession,” he said.
To contact the reporter on this story: Simon Kennedy in Davos at firstname.lastname@example.org
Last Updated: January 30, 2010 07:22 EST
By Simon Kennedy and Erik Schatzker