Thinking about GDP

Well who isn't? The BEA releases its report for 2011Q1 this Friday, and the forecasts aren't pretty. No one is predicting GDP growth of more than 3% or so for all of 2011 and some forecasters are going as low as 1.8% in the first quarter. Well, these people are looking at all the components of GDP based on recent data releases and probably have a pretty good idea. Nevertheless, my bird's eye view does not support such pessimism. Credit spreads are low, as shown yesterday. Also, the ISM manufacturing and nonmanufacturing surveys show a lot of strength. Even with a dip in March, the nonmanufacturing composite index averaged 58.8 in Q1 versus 55.9 in 2010Q4. Manufacturing has risen to 61.1 from 57.9. Hours worked rose at a 1.6% annual rate from 2010Q4 to 2011Q1. That's hardly blistering, but any decent rate of productivity growth gets us well above 2% GDP growth. So I'm going to go with, hmm, umm, let's see,... 2.8%. Heck, put me down for 3!