Don't get too excited by the GDP number

Today's GDP number, showing 2.5% annualized sequential growth, really helped the market open strong today and stay strong, especially after the first half GDP numbers. But if you view the GDP data on a year-over-year analysis, which will eliminate all seasonal effects, the economy has at best halted its decline this quarter rather than accelerated:

As you can see, Q3 2011 is just 1.6% higher than 2010, exactly the growth rate we saw last quarter, and for that matter in Q1 2008 (and remember how that turned out?). Also, if you look at real disposable personal income, that number only grew by 0.4% over the prior year, which is extremely anemic growth and the lowest since we came out of the recession (note that this number was showing 1% annual growth in Q4 2008, only turning negative the following quarter). And before the most recent recession the last time we saw a 0.4% number here was Q1 1991, which was officially a recessionary quarter.

So don't get too exhuberant just yet.