Dollars and Jens
Thursday, July 31, 2008
Now that I'm back in civilization I can blog the GDP report that came out today. Note that this one comes with a lot of revisions to previous data.
4.8% -.2% .9%1.9%
Consumption 1.44  .67  .61 1.08
Inventories .69 -.96 -.02-1.92
Fixed investment-.15 -.97 -.86 -.36
Net Exports2.03.94.772.42
Government Spending.
Exports were up at a 9.2% annual rate, while imports were down at a 6.6% annual rate. This is the first time since Q2 of 2007 that residential fixed investment has taken less than a full percentage point off of the number; it dropped at more than a 15% rate (which is less than it has been) but only took 0.6 points off the GDP, in part because it's only 2/3 as big compared to GDP as it was two years ago.

Because the inventory figure is so significant, I'll quote a comment I made in January:

inventory adjustment's impact is, on a short term basis, negatively correlated with consumption, and negatively serially correlated with itself; in short, looking at trends, I like to throw about half of it away and put the rest with consumption.
On that basis consumption was basically flat and the headline number about a point higher than reported. The consumer, perhaps boosted by stimulus checks, drew down inventory, and producers let them.

You can compare this to February, the last time I made a table like this. Note that the Q4 estimate at that point was positive, and has been downgraded 0.8 percentage points.

update: Residential fixed investment is now 3.5% of GDP, not too far above its multi-decade low in the early eighties. There's still a lot of overhang, and I would expect that multi-decade low to be broken, if not by the time the Q4 data come out then by Q1. On the other hand, if you imagine it's not going to dip below, say, 2.75%, that means further deceleration in that area would only take an aggregate of 3 percentage points off of future quarterly growth reports. (I saw a recent calculation of probably not quite 2 million excess housing units, which was about the annual rate of construction when it constituted 6% of GDP. If demand, over the intermediate to long term, is going to keep doing what it has done over the past couple decades, long-term equilibrium would suggest that we run below average by, for example, 2% of GDP for 3 years, or some equivalent.)

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