"Kee" Points with Jim Kee, Ph.D.

The first (“advance”) estimate of first quarter real GDP growth came in at 2.5 percent, above the fourth quarter’s 0.4 percent (2012). The Bureau of Economic Analysis, which releases the report, said that consumption spending, business spending (inventory build), and exports all contributed to growth, while federal spending reductions (as well as state and local government) were a slight drag. That’s pretty much in line with our expectations as laid out in the first quarter webcast, but for 2013 in general, not necessarily quarter-by-quarter.  


In fact, many Wall Street global strategists (Credit Suisse, Goldman Sachs, etc.) expect global growth to be stronger in the second half than the first, arguing that we are currently experiencing a brief (~3 month) soft patch.  Much of this minor optimism is due to expectations for continued accommodative global central bank policies. In fact, some feel that recent, weak data out of Germany (though stronger data from the U.K.) will force the European Central Bank to cut rates. This is a deep subject full of controversy, but several highly regarded economists (e.g. Nobel Laureate Robert Mundell) feel that a strong Euro is thwarting Europe’s recovery. Or as Jefferies’ strategist David Zervos put it, “The best news of the last few weeks is actually the German economic slowdown. A weak Germany will force the ECB to move in the right direction.”


However, others (Barclays) feel that this enthusiasm for central bank policies may be bordering on euphoria. The performance of stocks by sector definitely shows that those with  a lot of international exposure have underperformed their domestic counterparts, corroborating the slower global growth data. That’s particularly true of some of the more cyclical sectors like materials which are most dependent upon China-led growth. We’ll be watching global data points and internationally-oriented stocks closely over the next few quarters.


From the Financial Times: “The golden rule of tabloid journalism: simplify then exaggerate.” The Times was talking about the big debate over Reinhart and Rogoff’s work on country debt and growth rates, which I won’t get into here (yet!).  But “simplify and exaggerate” describes better than anything I know much of what has been written about financial crisis, monetary policy, expansions, recessions, and stock markets over the past five years. This is something to keep in mind when you’re inundated with bombastic, unsolicited emails.


Fun Texas Facts: This from Texas A&M’s great monthly publication, Tierra Grande (Journal of the Real estate Center at Texas A&M University): Texas exports more goods than any other U.S. state (about 20 percent of the nation’s exports come from Texas). About 40 percent of Texas’ exports are “petro-chemical” (petroleum and coal products, basic chemicals, etc.), the rest are things like semiconductors, auto parts, computer equipment. Over 50 percent of Texas’ exports are from the Houston area. Texans export to 222 countries. Mexico is the largest trading partner (36 percent), with Canada a distant second (9 percent). There are over 1,457 foreign firms operating in Texas, employing about half a million workers, mostly in manufacturing.