Monday, May 03, 2010

GDP or Business Cycle?

Barry Ritholtz has an interesting chart here, from a fellow who'd like to separate GDP from the "core business cycle." (NIPA)

What it does is separate Governmental spending from "real" spending; Gummint spends are part of GDP, and 4Q09's large jump in GDP (it is claimed) was largely caused by Porkulus, not by private activity.

Regardless of your opinion on that question, the chart does present a stark reality: the recession erased ALL economic growth since 2Q04.

Ugh.

4 comments:

Dominick O Maolain said...

That's not exactly an advert for unfettered corporatacracy. Not so much magic in that market.

J. Strupp said...

...and while government spending was the driver of growth in Q4, it appears that the American consumer has taken over in Q1 of 2010:


http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=PSAVERT&s[1][range]=5yrs\

IOW, we've managed to learn exactly nothing from the past couple of years and have begun to drop our savings rate back to pre-crisis levels. This is unsustainable, of course, given the debt load the average American continues to carry.

I have a bad feeling that we're in for an unpleasant surprise the second half of 2010 and into 2011.

Dad29 said...

Yah---and as you know, of that 3/10th of 1% 'gain' in income, 70% was transfer payments.

J. Strupp said...

yup.