Thursday, October 29, 2009

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

Today, the Bureau of Economic Analysis (BEA) released their first installment of the Q3 2009 GDP report showing that the economy expanded Q3 with GDP increasing at an annual rate of 3.5% from Q2.

Although these results will likely boost confidence among Wall Street speculators and gamblers and provide solid evidence to the feds that all their “hard work” has paid off, a closer inspection of the data reveals some seriously questionable statistics.

First, residential fixed investment (i.e. investment in residential properties) increased at an annual rate of 23.4% from Q2, a faster rate of growth than in any quarter since Q1 1998… i.e. faster rate of residential real estate investment than any quarter in any of the roughly 10 years of housing boom.

Non-residential fixed investment decreased at an annual rate of only 2.5% 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 22.3% nearly all the result of the government’s one time sham “Cash for Clunkers” program.

Finally, Real personal consumption increased at an annual rate of 3.4% on “Cash for Clunkers” while real personal income declined $15.5 billion and real personal current taxes increased $4.8 billion resulting in a 3.4% decline to real disposable personal income… so real incomes declined 3.4% yet real consumption increased 3.4%.

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