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Revised GDP is at 2.5 percent: What does that mean for the holidays?

Marketplace Staff Nov 23, 2010
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Revised GDP is at 2.5 percent: What does that mean for the holidays?

Marketplace Staff Nov 23, 2010
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TEXT OF INTERVIEW

JEREMY HOBSON: Now to our top story — the U.S. economy grew at 2.5 percent last quarter according to new figures this morning from the government.

Let’s bring in Juli Niemann an analyst at Smith Moore and Company. She joins us live from St. Louis. Good morning, Juli.

JULI NIEMANN: Good morning Jeremy.

HOBSON: So GDP growth was higher than first thought — dig into the numbers for us a little bit. Why is the government revising that figure upward?

NIEMANN: We had several categories. First of all — cars. Why are there so many new cars? Cash for Clunkers shredded most of the usable cars so there’s no inventory. People are forced to buy new. We’re seeing manufacturing inventories rise for exports, and computers — cheaper, more powerful, still continuing on. But the economy needs twice that growth to help unemployment. It takes a 5 percent rise in GDP to make unemployment go down 1 percent, and that’s not likely for a long time. So unemployment stays high. So who continues to spend to make the economy grow? It’s going to be the rich, and the government.

HOBSON: The rich, and the government. What about the rest of us, Juli? We’ll probably be doing some shopping this weekend. How does the retail sector look to you as we head into the crucial holiday shopping season?

NIEMANN: Buying on Black Friday is really important. That’s typically when retail companies go from red ink losses to black ink profits. Black Friday is very important. It did start in October though so they’re really pushing it heavily this year. We’re looking about 2.3 percent increase in sales, but after that people have really figured it out. They stay home for about two weeks, retailers get hysterical, I mean really promotional. They advertise even more than the election advertising — but it’s less annoying — they start really big give aways in the last 10 days. Online is going to be huge in growing this year because free shipping. So Black Monday is the big thing everybody’s looking forward to. That’s when shoppers go back to work and shop online and it’s the worst day for productivity for the office for the year.

HOBSON: And that’s next Monday I believe. Juli Niemann, analyst at Smith Moore and Company – thanks so much – and have a great Thanksgiving.

NIEMANN: Thank you.

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