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“Davidson” submits:

US Real GDP vs. Total Govt Expenditure & Investment has a 3^rd series titled Real Private GDP that is in my opinion better at displaying the US economic activity. The reasoning behind this is that government spending is included as an additional factor for GDP when in fact, it is additional and parasitic spending which extracted in the form of taxation from the underlying value creation by the US economy. Government spending sometimes exaggerates and at other times under-measures the strength of this underlying economic activity. Subtracting government driven spending from GDP, even though not perfect, provides a better picture of the US fundamental economic picture.

Real Private GDP has been remarkably consistent from July 2009 at 2.84% annual growth despite multiple major events over the period including wars, the panic of “Peak Oil”, the COVID lockdown etc. The many forecasts for recession the last 24mos are shown to have been unsupported by this data in hindsight and reveals many failures in techniques deployed by forecasters.

GDP is a hindsight indicator and should not be used for forecasting, but it serves well to judge the reliability of past forecasts. It is better to rely on management guidance at individual companies, in my opinion, who have a decent history of success to view the future than listen to the many strategists whose forecasts, often self-serving, that have typically not hold up in a historical review.

Current guidance across most economically sensitive companies is positive. That many forecasts remain pessimistic indicates significant opportunities remain post-COVID.

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