In keeping with tradition, I'll outline what I believe to be the most important statistics in the newest GDP report (percent changes from the previous quarter):
- Consumer spending was up sharply by 3.4%. Thank you, cash-for-clunkers.
- Cash-for-clunkers amounted for 1.6% of this quarter's GDP growth rate. Thank you, cash-for-clunkers.
- Real federal government consumption expenditures and gross investment increased 7.9 percent (National defense +8.4%, Nondefense +6.8%, State and Local -1.1%). Obama is the peace president, right? State and local governments wisely cut back on expenditures while the federal government is full steam ahead with the Fed's printing press. Fortunately, California didn't have explicit access to it in order to purchase its own bonds.
- Housing and utilities increased by for the first time in 15 quarters (i.e., 3.75 years). More houses is exactly what we need! We also need more cars. Thank you, cash-for-clunkers. Perhaps the federal government can enact some sort of dough-for-dumps program (credit to Peter Schiff).
- Prices of goods and services rose by 1.6%, in comparison to .5% in the second quarter. See commentary below.
- Personal income income declined by .5%, despite the government's best efforts to borrow money from abroad and print it here at home to distribute to its citizens through Social Security and the American Recovery and Reinvestment Act (i.e., "stimulus").
- Declining personal income and rising prices of goods and services somehow combined to create a more "confident" consumer--consumer spending was up sharply, despite consumers having less money to spend. Thank you cash-for-clunkers (among other bogus government incentives).
- The personal savings rate was 3.3%, which was 1.6% lower than the previous quarter.
In summary, I cannot imagine what any individual would find inspiring in this report, or to cause the DJIA to end nearly 2% up for the day. Perhaps I'm missing something. Could happy days be here again?
I'd suggest not. We're living on borrowed time (and money), which will come to an end (hopefully sooner rather than later). The sooner the US stops fooling itself into believing it's in great shape economically because the Fed owns a printing press and other governments around the world are stupid enough to loan us money for 30 years at 5% interest, the better off we will be.
As an aside, 530,000 new jobless claims were filed in the week ending October 24th. Those who filed a claim would likely argue that happy days aren't here again as well.
Hi, I think you're missing one detail, you do a good job with putting these numbers together, but what I think you don't connect is the relationship between states cutting back and stimulus money. I would postulate that the reasons the states cut back on spending is because they knew they had federal monies coming, so they didn't have to spend their own. Thoughts?
Unlike the federal government, the states don’t have creative options to fund a deficit and they have enough experience to know they can’t depend on the federal bureaucracy to bail them out in a timely fashion if at all, so they have to cut spending.
Hi Sean, thank you for your question. My answer is below:
I'm not sure how the stimulus money is counted in regards to the states. I believe the stimulus money is likely counted as part of the federal budget, in which case, it would not be counted in the state and local budgets. However, as William said, the states do not have a printing press like the federal government does. So, it is reasonable to believe that if the federal government hadn't of bailed them out, that they would have cut spending anyways (as the numbers indicate). I hope that answers your question.
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