Today, the Bureau of Economic Analysis (BEA) released first installment of the Q3 2008 GDP report showing the second contraction in four quarters with growth declining at an annual rate of -0.3%.Looking at the report more closely though, the top-line GDP result would have been much weaker had it not been for a surprise and truly unusual 18.1% surge in national defense spending that, combined with a healthy increases in other federal, state and local government spending, added over 1% of growth.
Fixed investment and personal consumption, on the other hand, provided significant drags on growth with non-residential investment declining -1.0%, residential investment declining -19.1% and personal consumption expenditures declining -3.1% led by a whopping -14.1% drop-off in durable goods.
The following chart shows real residential and non-residential fixed investment versus overall GDP since Q1 2003 (click for larger version).
