Global| Jul 30 2012U.S. GDP Is Depressed By Public Sector Contraction
by:Tom Moeller
|in:Economy in Brief
Summary
There's no doubt that GDP growth has been moderate. Data released last week indicated that year-to-year growth of 2.2% ending in Q2'12 was about the same as during all of 2011 (1.8%) and 2010 (2.4%). After past deep recessions, growth [...]
There's no doubt that GDP growth has been moderate. Data released last week indicated that year-to-year growth of 2.2% ending in Q2'12 was about the same as during all of 2011 (1.8%) and 2010 (2.4%). After past deep recessions, growth of 5-to-7% was usual. Expansions in each economic sector has been depressed versus the norm. Consumption growth of 1.9% during the last four quarters compares to 5-to-7% after earlier downturns, residential investment is showing some life (10.7%) but that's a fraction of the norm and even business investment growth of 10.2% is subpar.
Nowhere is the comparison to past economic cycles more depressing than in the government sector which is 19% of the real economy. Real spending fell 1.4% last quarter (-2.4% y/y) and it's been down since 2010. Defense spending fell 4.0% during the last four quarters while state & local spending fell 1.8%, for an unprecedented two year decline. The best that can be said is that these rates of decline are more moderate than those in 2011.
Excluding the government sector, GDP growth is still subpar. Growth in private sector spending of 2.2% in Q2'12 pulled the y/y comparison to 3.3%. Nonetheless, the private sector is holding onto a modest recovery. Recently, however, forecasts for economic growth have been lowered. Much of that is due to a still-struggling private sector spending and a moribund public sector.
The latest GDP figures can be found in Haver's USECON and USNA databases; USNA contains basically all of the Bureau of Economic Analysis' detail on the national accounts, including the new integrated economics accounts and the recently added GDP data for U.S. Territories. The Consensus estimates can be found in AS1REPNA.
| Chained 2005 $, % AR | Q2'12 | Q1'12 | Q4'11 | Q2'12 Y/Y |
2011 | 2010 | 2009 |
|---|---|---|---|---|---|---|---|
| Gross Domestic Product | 1.5 | 2.0 | 4.1 | 2.2 | 1.8 | 2.4 | -3.1 |
| Government Spending | -1.4 | -3.0 | -2.2 | -2.4 | -3.1 | 0.6 | 3.7 |
| Private Sector GDP | 2.2 | 3.1 | 5.6 | 3.3 | 3.0 | 2.8 | -4.7 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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