The federal government is a large and sprawling beast, spitting out economic reports as routinely as politicians call press conferences. The only difference in the 21st century being that official statistical releases now come a la carte, and in a variety of flavors. Search for a perspective that suits you, and consume only what you want.
Case in point: If you’re feeling gloomy about Friday’s surprisingly weak report on the economy for the fourth quarter, the ever helpful Treasury Secretary John Snow has a few encouraging words to counter the gloom emanating from that other government agency. “The advanced estimate of fourth quarter 2005 GDP released this morning is inconsistent with the underlying strength of the U.S. economy,” he opined in a press release dispatched after the Bureau of Economic Analysis released the advance estimate of GDP for last year’s October-through-December period.
Not only does Secretary Snow find reason to question BEA’s fourth-quarter analysis, he suggests that an informed observer might do well by looking elsewhere for economic enlightenment. “I would not read too much into today’s numbers,” he counsels. “They are somewhat anomalous, reflecting some special factors.” (Is that Treasury-speak for the BEA goofed?)
To be sure, Snow’s not alone in putting a different spin on the numbers. More than a few dismal scientists have made similarly optimistic observations since the latest GDP report was released, as we noted Friday. The question is whether the bond market agrees. Venturing a guess, Charles Dumas, watching the action from London at Lombard Street Research, writes that there are “excellent buying opportunities for long bonds ahead.” He reasons that “it will take a miracle…to prevent a sharp U.S. slowdown in the second half 2006, possibly to nil growth by Q4,” a scenario that implies lower interest rates and thereby fueling a new bull-market leg for bonds.
The Treasury Secretary begs to differ. “The American economy is on a good course and I am very confident,” he enthuses. “I am optimistic about the first quarter and the year ahead and am confident that we will see strong growth for the year.”
It’s not often that one government agency disparages the data releases of another. Coming on the eve of Alan Greenspan’s retirement, the arise of an inter-government dispute over numbers and methodology does little to promote confidence in official statistics. To be sure, it may very well turn out that the fourth-quarter GDP number will be revised upward, an expectation that more than a few pundits espouse. Secretary Snow, meanwhile, isn’t compelled to wait for a revision, upward or otherwise.
As it happens, the benchmark 10-year Treasury closed over 4.5% for the last two trading sessions, an elevation not seen in over a month. The fixed-income set, as any market observer can tell you, has had a mind of its own in recent years, and the trend shows no sign of ending.
The economy may or may not be slowing, the Fed may or may not continue easing, and government agencies may or may not agree with one another’s statistical releases on any given day. Other than that, all’s clear as glass in Washington as the world awaits the first pronouncements from Ben Bernanke, assuming the Senate tomorrow confirms him as Greenspan’s successor.