Tuesday, November 24, 2009

Bull Trip?!: GDP Report Q3 2009 (Preliminary)

Today, the Bureau of Economic Analysis (BEA) released their second installment of the Q3 2009 GDP report showing that the economy expanded Q3 with GDP increasing at an annual rate of 2.8% from Q2, a downward revision of .7% since October’s advance release.

The significant downward revision notwithstanding, today’s results will likely continue to boost confidence among Wall Street speculators and gamblers, a closer inspection of the data reveals that most of the growth in Q3 was simply government sponsored.

First, residential fixed investment (i.e. investment in residential properties) increased at an annual rate of 19.5% from Q2, a nearly the fastest rate of growth seen in the last 10 years. This is not likely a trend but the result of the governments first time “homebuyers” policy and associated dynamics.

Non-residential fixed investment decreased at an annual rate of only 4.1% in the same quarter that saw commercial real estate prices decline at their fastest annual rate in at least 20 years while vacancies increased and rents declined.

Durable goods increased at an annual rate of 20.1% nearly all the result of the government’s one time sham “Cash for Clunkers” program.

Without the clunker (housing and auto) stimulus policies, the supposed pop in fixed residential investment and durable goods and the strength in fixed non-residential investment today’s number GDP result would have been flat at best.