GDP Nonsense

According to this morning’s first estimate, Real GDP grew at a 1.7% annual rate. First quarter real GDP was revised down to 1.1% from a first estimate of 2.5%. Taking into account Lakshman’s note that the first six months after release only yields about 10% of the final revision, it would seem that he is looking good for his assessment that the economy is in recession.

Of more interest is the GDP deflator of 0.7%, I believe a new record low. Bonds are being trashed this morning because the ADP employment number was strong, at 200K, which implies that Bernanke is more likely to “taper” bond purchases. But the major longer term influence on bond prices is inflation, which is rapidly becoming a thing of the past. This deflator is very very bullish for Treasuries. short term BS aside.

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