U.S. GDP Second Quarter 2012 Falls To 1.5 Percent, July Consumer Sentiment Hits Year Low, Has The Recent Bond Bubble Burst?
The U.S. economy grew at a lulling rate of 1.5 percent for the second quarter of 2012 the Commerce Department said today. This is a decrease from the 2 percent rate of growth in the first quarter of 2012 and is further evidence that worries about the ‘fiscal cliff’, general business uncertainty and high unemployment are having a negative impact on the economy. Our estimate of GDP for the second quarter 2012 was 1.3+- 0.2 percent.
- 2007 GDP 1.91 percent
- 2008 GDP -.36 percent,
- 2009 GDP -3.54 percent
- 2010 GDP 3.02 percent
- 2011 GDP 1.7 percent
- 2012 GDP 1.75 percent – through 2nd quarter
Consumer Sentiment Hits 2012 Low
Consumer sentiment fell today according to the Thomson Reuters/University of Michigan final index reading for the month. U.S. consumers felt the doldrums of the U.S. economy and sentiment fell to the lowest level this year due to 41 consecutive months of unemployment above 8 percent. Consumer sentiment fell to 72.3 in July 2012 from 73.2 in the prior month.
Bond Bubble Takes A Hit.
Two days ago our analysis showed the bond market was in a bubble although this seemed under the radar from most market participants.
“The bond market is in a bubble and traders in fixed income have gained from increased bond prices, with no risk even though yields are effectively negative.” See – New Home Sales Down By 8.4 Percent June 2012, Is QE3 Coming Next Week? (Wednesday July 25, 2012)
The TLT exchange traded fund, Barclays 20 year U.S. Treasury Note Index, had risen to new highs and bond owners were getting paid a negative yield but ignored this due to price increases in what was considered a ‘safe haven’ investment. This ‘risk perversion’ was bad for the overall market and the TLT exchange traded fund dropped significantly today. Is the bond bubble over? For now it seems there could be pressure on non-risky assets in the medium run and we are bullish on equities as we expect to hear more news from abroad and at home from central banks. By 3:00 pm EST today, the TLT had fallen from $132.22 on Wednesday to $127.30 in less than 2 full trading sessions.