2009 GDP: When the Worst Could Be Over - Part 2 (Morningstar)

The Financial Crisis Robert Johnson: Well this is Bob Johnson, Associate Director of Economic Analysis at Morningstar. Today we had the GDP numbers, the broadest measure of how our economy is functioning or release for the fourth quarter. The number show that decline on annualized rate of real GDP of 3.8%. Today, I have Bill Bergman from our financials team to discuss with us the GDP number. Bill welcome! Bill Bergman: Hi Bob, nice to be here. Robert Johnson: Bill let’s look ahead just a little bit to the first quarter here. I’m thinking the 3.8% decline; we’ve got some the retail side to get just a little bit. I am thinking something in the 4 to 5 range, full of down for the first quarter and that may be the worst that we see. Bill Bergman: That’s the reasonable expectation in my head Bob. You know the inventory thing is something that – and the reported data anyways probably going to be less of a contribution for us in the first quarter given us contribution on the fourth quarter. Robert Johnson: Right. Bill Bergman: People are going to be working the stuff down I think in ways that--- we do set reported GDP number for the first quarter. Robert Johnson: Right. Bill Bergman: But underneath it I think it’s--you know we’re seeing some anecdotal evidence of improvement in both in the durable goods area and the housing area. Robert Johnson: Now, let’s talk about those two. On the auto side what have you heard trend and what's kind-- Bill Bergman: I don’t want to hang my hat on one piece of evidence too much, but the scuttle other the auto show in Detroit was that it look likes sales in traffic are improving in January from December, despite how bad the winners been. And that’s something normally if from December to January in the auto world you see a pretty good drop off. And some of the science that some of the people we were listening to -- where that it’s possible that January is picking up. In contrast to what it normally does during a January. Robert Johnson: Now, let’s go on the housing side. I’ve also heard some of the things of might be somewhat similar there. Bill Bergman: Perhaps home builders are seeing what we—what will Eric Lander here our home builder analyst and he’s hearing form—again, this is anecdotal evidence, from a sub sample of all the home builders that are out there, but they have the similar – with the autos, you know have this December to January normally being a week. You know January week and twelfth until December it’s possible that that opposite is happening this time both in autos as well as home building the traffic and the orders that the home builders are getting. We’re such low levels anyway; it’s difficult to see until anything but improvement I think from here on a home building side. That’s going to have good implications for the rest of the economy. Robert Johnson: Well, Bill thank you very much. So, just to summarize we had the GDP number that was pretty bad this morning but better the consensus. We’re looking for the next quarter to also be kind a of the weak number but we’re beginning to hear stories around the edges of the consumers getting a little bit better and certainly the better price numbers are helping that along. We still got a rough road on industrial spending in investment and our import-export front still a couple of tough quarters in front of us, but we’re beginning to see some light at the end of the tunnel. From Morningstar this is Bob Johnson.