GDP in Q3 rose 2.0%, better than expectations of 1.8% and an improvement from the 1.3% rise in Q2. Nominal GDP was up by 4.8%, well above the estimate of 3.9% as the Price Deflator was up by 2.8%, the 2nd most gain since Q3 ’08 and higher than the forecast of 2.1%. Personal Spending was up by 2%, actually a touch less than expected. Gross Private Investment was up by .5%, below the gain seen in Q2 as spending on equipment and software was flat after solid gains in previous quarters. Residential construction picked up some of that slack with a 14.4% rise. Trade was a modest drag as exports fell 1.6% while imports were lower by just .2%. Federal Government spending looks like the main driver of the better than expected headline print as it rose by 3.7% led by a 13% gain in defense spending. Spending at the state and local level fell by a .1%. Inventories were a tiny drag as they rose less than the gain seen in Q2. Real final sales, taking out the inventory influence, rose by 2.1% vs 1.7% in Q2 and 2.4% in Q1. Bottom line, 2% growth is about in line with the average seen over the past three years of 2.1% but the deceleration in trend is evident as the economy grew 2.4% in ’10, 1.8% in ’11 and averaging 1.8% in ’12. Mathematically, GDP should grow at population growth + productivity. Population is growing by 1% and productivity just 1% vs the 30 yr average productivity growth of 2.2%. We need more savings and investment for this, not more borrowing and spending pushed by gov’t monetary and fiscal policy.

Category: MacroNotes

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

6 Responses to “GDP better thx to defense spending”

  1. ilsm says:

    In the military industry congress complex we have to spend our “budgets” by 30 Sep, or; we have to explain that we lied about what we needed or what we could get the welfare queens in the industry side to deliver. No one despite how corrupt or inept has ever lost any money in the war profiteering gig, at least not in the 40 years I have seen.

    There is always a blip in Q3 war welfare expenditures so the next budget can be defended by saying: “look how much we spent last year”.

    No one asks whether the expenditure was worth the scarce taxpayers’ buck!!

    Beside the multiplier [for cost overruns like the F-35 is experiencing] , $1.6T in expensive super systems is between .6 and .8 according to how much extra (inflated wages for one example) is paid for the industry to deliver untested stuff.

  2. rj chicago says:

    Coming soon to a GDP near you – a revision to the 2.0 number reported today. Any bets on what that revision will be?

  3. victor says:

    If the GDP were to grow at say 5% plus and the manufacturing jobs were to “return” to our shores and North America became energy independent, wouldn’t the environment suffer commensurately? China anyone? Just asking, since the promised millions of good paying green jobs in the 2008 Hope and Change Campaign are nowhere in sight?

  4. Greg0658 says:

    Vic – respectfully since it is the OpSystem – but that boil down makes you sound like a bean counter numeroUno .. thanks for the open’g to drill that down with my take

    1st I write nearly daily for my personal hope & change campaign of which no one else seems to be in/on .. including the POTUS – for it is but our puppet on a string

    2nd the fact that capitalism needs to continue to grow a population to consume stuff that has been built to that consumer desire ie: Built To Last .. SO & OR that stuff needs to be blown up for GDP growth

    3rd which is it ??
    keep growing the population – increase’g drain on required commodities along with the labor force (already to large for its own good) .. TO grow GDP for the sake of the OpSys in place
    until the balloon pops (as nature intends it)
    command and control of the so termed smartest animal on the planet earth

  5. Greg0658 says:

    that rant avoided the other deep impass you opened:
    ‘ manufacturing jobs were to “return” to our shores ‘

    1st recycle’g cash inside our borders – FACT > cash in recycle mode doesn’t burn up or evaporate
    commodities do tho

    2nd that comes across like keep manufacture’g dangers over there
    hummm .. I guess the Chinese just fell off the turnip truck

    3rd thanks again for some meat to chew on and spit out

  6. denim says:

    Every state has a constituency that benefits from defense spending. Members of the National Guard and Coast Guard and their suppliers come to mind first. Then come the camps, airfields, and Forts and their suppliers. Defense Department grants and management of research projects like the DARPA internet that we blog on today keep our University based brain trust productive for the whole economy. Sure we need watchdogs like Proxmire was in the past. ( ) But he was watching something that is priceless. That the watchdog found waste does not mean that government projects are the problem, it means that greed driven people are the problem… and we need watchdogs to sniff them out.