Scott suggests the stock market “soared on the news” that NGDI annualized was a robust 5.1% annualized on average over the last two quarters, while NGDP annualized growth was only 2.2%. And ‘pleads’: “Don´t anyone tell the Fed about NGDI”.
Much more likely the stock market went up (and also most everywhere else) on Tuesday and Wednesday because: (1) The PBOC said on Tuesday they would provide liquidity to the market and (2) On Wednesday Q1 real growth was revised downward significantly (supposedly diminishing the chances of an early ‘taper’).
NGDI and NGDP are two sides of the same accounting coin. Data collection is not perfect, so there are discrepancies that nevertheless get offset over time to bring them back into equality.
The first two charts show NGDI and NGDP growth (%YoY) for a long period and since the start of the 2007 recession. Even for the shorter period they give out the same indication for the economy´s performance.
The third chart shows that for the last six months they are “coming together”, as they must. Focusing on NGDI certainly does not indicate that the economy is performing better than one might think!
I reproduce below the stats table from yesterday´s post. It shows that the present ‘recovery’ is not worthy of the name, even abstaining from considering that the previous drop was the deepest in the post war period.