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Use of ‘Recovery’ Word Persists, but Economy Is 'Expanding'

The economic output of this nation was $13.25 trillion in 2010, up big from the 12.88 trillion output last year. But more importantly, Real Gross Domestic Product last year surpassed 2007’s pre-crisis GDP of 13.23 trillion. So why does everyone keep calling this an economic “recovery”?

Cash Register
Paul Sakuma
Cash Register

“Growth in last year’s fourth quarter pushed total economic output in the U.S. above the pre-recession peak,” said Mark Luschini, chief investment strategist at Janney Mongomery Scott overseeing $50 billion, in a note to clients this week. “The economic ‘recovery’ is over.”

Luschini wasn’t making a pep talk. He was simply stating the facts. The strategist also points out that final sales (GDP excluding inventories) jumped 7.1 percent last quarter, the highest since 1983.

Our own Federal Reserve used the word “recovery” three times in their latest statement on the economy. Meanwhile, searches on Google for the term “economic recovery” have actually increased this year. The term “economic expansion” doesn’t even register.

The ISM Services Index, a measure of the largest part of the economy, came in today at a better-than-expected 59.4, the highest level since August 2005. Readings above 50 signal an expansion. But still some pundits are dragging their feet on changing their characterization of this economy.

Luschini’s “comments scare me,” said Simon Baker, CEO of Baker Avenue Asset Management. “Commodities prices are through the roof, causing producers to raise prices and therefore taxing already challenged consumers. If this is an expansion, it's going to be a short one. I'm placing my bets on a contraction in the next 12-18 months with inflation as the catalyst.”

In comments today to the press, Fed Chairman Bernanke said that he couldn’t consider this recovery complete without a period of steady job creation. Economists expect the Labor Department to say tomorrow that the unemployment rate remains at 9.4 percent.

“I don’t mind the spirit of the message as positive thoughts are always welcome,” said Nicholas Colas, chief market strategist at BNY ConvergEx Group. “But GDP is just one factor in assessing the welfare of a country. And one decreasing in importance.”

Still, Luschini’s numbers don’t lie. Enjoy your expansion.

For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC.


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Trader disclosure: On Feb. 3, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Joe Terranova owns (VRTS), (C), (UPL), (GM), (PEP), (MS), (LTD), (CVI), (CVE), (SU), (CPX), (CNQ) and (POT). Guy Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE) and (BTU). Steve Cortes owns (SVU), (MO), (PM), (K), (SWY) and (EXC). Steve Cortes are long U.S. Treasuries. Steve Cortes is short (LVS). Steve Cortes is short Gold. Steve Cortes is short Crude. Karen Finerman owns (BAC), (AAPL), (BP), (C), (WMT), (MSFT), (JPM), (GOOG) and (HPQ).
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FAST FIRE 12/21/2010
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