Q3 2009 GDP - 3.5%

GDP hit 3.5% in Q3 2009.

Q3 2009 GDP
Src: BEA

Yea, Yippee! What's behind the numbers?

A reminder, GDP is:

Y=C+I+G+{(X-M)}

where

Y=GDP, C=Consumption, I=Investment, G=Government Spending, (X-M)=Net Exports.

So, what components of GDP contributed to such a nice increase of economic growth? In Q3:

  • Price index - +1.6%
  • Consumption - +3.4%
  • Durable Goods - +22.3% (cash for clunkers)
  • Nondurable goods - +2.0%
  • Non-Res. investment - -2.5%
  • Residential Fixed Investment + 23.4%
  • Exports - + 14.7%
  • Imports - +16.4%
  • Gov. spending - +7.9%
  • Private Inventories - + 0.94%

So, Consumption, contributing 2.4% of the Q3 GDP, and gross private investment (at +11.5%) were the reasons GDP increased. So in other words, people bought new cars on cash for clunkers and bought more overpriced (still) houses with a first time home buyer's tax credit and distressed sales.

Great. Pom poms back in.

Personal income decreased -0.5% in Q3. Disposible personal income: -0.7%, yet get this, personal outlays increased +5.8% and the personal savings rate dropped to +3.3%.

Ok! So Americans personal income continues to drop but who cares, they are consuming more...

Wasn't this out of balance economy the original problem?

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Yeap.

The good and the bad. The DPI and savings numbers are very interesting.

RebelCapitalist.com - Financial Information for the Rest of Us.

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cash for clunkers

EconomPic has a beyond belief graph here showing just how much the auto output changed Q3.

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I hope the stimulus was designed

in a way that starts with tax incentives to provide the initial shot followed by more employment intensive stimulus. I hope.

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Yes, but

Good post, but combine that with the $24,000 per clunker reported by edmunds and (1) not only did we go further in debt, (2) Q4 should be very low.

My take is http://learnecon.blogspot.com/2009/10/government-purchases-35-growth-rat...

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Steven Myers, good insight!

I just went to your blog and read your analysis. Very good addition and I esp. like the conclusion the government just "bought" a good GDP report.

What I find astounding is precisely how giving a $4500 rebate instead manages to add $24k in costs to each vehicle.

Your government "at work"?

Just so you know, EP is a community blog, so if you would like, you can create an account and cross post (see the User guide on a few requests to "fake out" the Google for it doesn't like duplicates on the Internets) here.

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Alice in Wonderland

Point of Interest…

Morning headlines in the Rochester, NY "Democrat and Chronicle" (Gannett paper):

1. “U.S. economy shows growth in third quarter” - with the same accompanying bar chart as above.

2. “12,000 KODAK EMPLOYEES AND THOUSANDS MORE RETIREES MIGHT PAY MORE FOR HEALTH CARE IN 2010”

I feel like Alice in Wonderland: "What's down is up. What's up is down."

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