GDP revised up to 5.9%

Woohoo! . . . sort of.

The headlining number looks pretty good, but I posted before, as did many other bloggers, about most of the change being due to private inventories, while core GDP resulting from increased demand was only up 2.2%. In that sense, this revised report isn't good, as GDP growth due to increased demand was revised down to 1.9% from that 2.2% level.

PCE and Residential investment were both revised down. The picture kind of comes together like this. Core CPI was down, corresponding to the low PCE and Residentiall investment growth, and PPI excluding energy was up, which corresponds to the upward revision of change in private inventories. At the beginning of recoveries, we generally see a lot of "growth" because of this inventory factor, as managers generally overshoot the downtrend. So when market conditions improve, you see a quick jump in inventory to meet the theoretical demand... Trouble is, there's still not much demand. That's why we haven't seen much growth in employment in manufacturing or anything else, and why we've seen solid increases in temporary workers and labor productivity.