“Lets not start sucking each others dicks yet”*
*The Wolf
Could be. The economy is such a complex beast, I’m very skeptical of anyone touting a driect cause/effect for any one factor. More money in the hands of consumers is good-- I don’t doubt that. Can a few hundred bucks to “Joe Sixpack” induce a 7.2% spike in the GDP? If only it were that simple.
I’m a little miffed by the:
“The economy grew at a scorching 7.2 percent annual rate in the third quarter”.
So in the third quarter specifically the GDP grew the equivalent of what would be 7.2 if this was kept for a whole year or the GDP gained until now this year 7.2 growth ?
What will the annual average be ?
Well, I am glad that most people here aren’t willing to give GW credit for the sunrise. I am willing to admit GW’s policies must of had some stimulative effect…Hell, with all the money he has injected into the economy by running up the deficit with tax cuts and a spending binge, what is amazing is how little effect it seems to have had so far. (Alan Greenspan has kept interest rates very low so the negative effects of the deficit causing higher interest rates, to the extent it does, hasn’t come in yet.) As people like Krugman have pointed out, GW seems to have gotten about the minimum bang of stimulus for the maximum buck of deficit increase by giving the tax cuts primarily to the rich who don’t tend to spend the extra money as much as the middle class and poor would.
It is easy to stimulate your own economy by just going out and spending a lot of money on your credit card. The problem comes when it is time for you to pay your bill!
yes
no
Won’t know until the end of the year. Then it won’t be an average, it’ll be an annual rate.
Would this be a repressed demand of sorts ? Sudden return of confidence by consumers ? (sorry if I get the economic terms wrong… studied economics in portuguese)
Hypothetical question: Is the media playing up this one report (emphasis on the one) in an attempt to boost investor confidence, and thus really get the economy rolling again?
rjung, yes I think its what their are doing…
Could be. But the latest numbers reflect a big increase in business spending, too. You need to dig beneath the surface of what is usually reported in the popular press to get at what’s really going on, if that’s even possible.
The economy grew at an annualized rate of 7.2%, measured over the quarter.
That means in the last quarter, GDP increased by a total of 1.8%.
GDP is roughly 10 trillion dollars, so that means an increase of about 180 billion dollars. Bush’s tax cut over that quarter was what, 45 billion or something? With all those refund cheques that went out over the summer? That’s not chicken feed, and it probably has a fair impact on that number.
Also, most analysts feel that a good chunk of that growth was consumer driven, which in turn was fueled by mortgage refinancings and the tax cut.
This also means that this level of growth is probably not sustainable. And in fact, analysts are still predicting growth in the next quarter to be around 4-5%. Still, if it comes in at that level, that will mean that economic growth for 2003 will come in at close to 5%, which is a pretty good number.
I’d also like to point out that an increase in GDP of 180 billion dollars should bring an additional 30 or 40 billion dollars in government revenue, so expect the deficit numbers to be revised slightly downwards after this.
And this is actually a fairly broad-based recovery. Consumer spending is up. Jobless claims are down (and still well below the magic 400,000 level which indicates job creation is greater than job losses), business spending is WAY up, and purchases of American goods by foreigners is also up. That last is especially good news for the job market.
And maybe the most important indicator for growth for the next quarter - inventories are way down, and are now at one of the lowest levels as a percentage of sales than they’ve been in a long time. This would suggest an increase in manufacturing activity in the next quarter, which should be good for job creation.
Certainly Bush’s tax cuts weren’t solely responsible for the increase, but they may have pushed growth up by a percentage point or two.
Sam: An excellent overview. Perhaps you could expand on it a bit.
What about the above claims of a ‘porsche recovery’? Will continued increases in productivity mean more growth without jobs?
Something else is fueling this… are the asians sending all their dollars to the US again ?
I hope the right wing biased mass media really spins this out of proportion to what it is. It is good news, right? All economic data must be analyzed carefully. But a spike in GDP is hard to knock, IMO, unless the next quarter really disappoints. Numbers games can be fickle.
I do not think the tax cuts are responsible for the economic rebound. They are one tiny piece of the whole puzzle. One might as well thank the credit card companies for bombarding us with promotional offers, since college, when we had near zip for income, remember? Thanks. Let’s not forget the American convenience store, without which nothing could be accomplished conveniently.
I think the cuts are regressive. They should be targeted directly at me. Moreover, I think that stronger economic growth tends to follow long periods of slow growth or recession in the United States as a rule.
One more thing, close the SUV tax loophole. 6,000 pounds and you get a discount? Someone get Johnny Cochran to properly express my outrage.
How could they be, what with all that anti-US sentiment out there.
Why do you think that “something else” must be fueling this? It’s just one quarter, and very unlikely to be repeated. The US has seen very slow growth for quite some time. It doesn’t seem like anything other than the normal business cycle is needed as an explanation. Now, if we saw several quarters in a row with growth like that, then we might want to look for unusual inputs.
Then you shoulda been in the top tax bracket like me and the rest of the badasses driving this expansion. I spent my tax cut on fast cars, fast women, and hundred dollar bills. There’s 1.2% growth for ya right there!
Boy, even with all our partisan blinkers on (yours truly is a Democrat), this was a fantastic report.
Let’s recap, from cbsmarketwatch.com:
Given that inventories continue to be run down, I’d say that strong growth in GDP is sustainable through the next couple of quarters, because those inventories have to be rebuilt at some point.
The only cloud in this silver lining is in this apparently good number:
The problem with this is that durable goods are precisely that, durable. The above performance is not likely to be repeated any time soon.
I posted this in a different thread before, and I’ll post it again. The path to economic stimulus is straightforward and known, and this Administration has followed the textbook to a tee. The things to do are:
1 - Run a deficit.
2 - Lower interest rates.
3 - Devalue the currency.
All three have been and are continuing to be done. The strong sales numbers are a result of 1 and 2, while the strong performance of exports is a result of number 3.
As for the lack of jobs, there’s outsourcing, galloping health costs, and productivity to blame.
Putting on my partisan blinkers, Bush’s goose is still cooked if he can’t figure out a way to get some job creation going. There’s a lot of angry, unemployed and underemployed people out there, and they remember that this is what it also felt like under Bush I, when it comes to jobs. For a lot of voters out there, the thought is that the acorn didn’t fall far from the tree.
Finally, the current account deficit is still a problem. If the strong growth turns out to be sustainable it might lessen due to a shrinking trade gap and stronger foreign direct investment, which would finance the remainder in a way that actually strengthens the long-term capacity of the economy to grow. But that kind of progress remains to be seen.
So where are the jobs?
Hypothetical question: Could positive GDP numbers like this artificially boost consumer confidence in time for the holiday spending season?
Assuming that the tax base is again increasing, and spending remains static, then yes, the deficit would be shrinking.
However, spending WILL increase, especially given the war that Dubya was nice enough to start for us. More importantly, once the larger chunks of Bush’s tax cuts kick in, net taxes will end up pretty much where they were this time last year.
That’s assuming that 1.8% growth this quarter (7.2% is a projection, not the actual increase) continues for at least a year.
Hhmm… its the EXPORTS then ! Of course. Dollar is weak… exports go up… imports stay the same. That helps the US industry. Why did it take so long to affect thou. The dollar has been falling for quite a while.
With low interest rates and devalued currency... won't we see a bit of extra inflation ? Especially since many of the consumers are fueling their buying with credit ?