By Gary Shilling
In the third quarter, real GDP grew 2.8% at annual rates from the second
quarter. Without the increase in inventories, the rate would be 2.0%, in line
with the 2.3% average growth since the economic recovery commenced in the second
quarter of 2009.
Furthermore, the step-up in inventory-building from the second quarter may
have been unintended, suggesting cutbacks in production and weaker growth in
Also, consumer spending growth, 1.5% in the third quarter,
continues to slip from 1.8% in the second quarter and 2.3% in the first while
business spending on equipment and software actually fell at a 3.7% annual rate
for only the second time since the recovery started in mid-2009.
spending was about flat with gains in state and local outlays offsetting further
declines in federal expenditures. Non-residential outlays for structures showed
strength as did residential building. The 16-day federal government shutdown
didn't commence until the start of the fourth quarter, October 1, but
anticipation may have affected the third quarter numbers.
The 2.3% average real GDP growth in the recovery, for a total rise of 10%,
has not only been an extraordinarily slow one but also quite unusual in
structure. Consumer spending has accounted for 65% of that growth, actually
below its 68% of real GDP, as shown in the second column of Chart 1. Government
spending—which in the GDP accounts is direct outlays for personal and goods and
services and doesn't include transfers like Social Security benefits—has
actually declined. Federal outlays fell 0.4% despite massive stimuli since most
of it went to welfare and other transfers to state governments. But state and
local spending dropped 0.9% due to budget constraints.