Sunday, October 31, 2010

Third Quarter GDP - 2% Annual Growth

It appears the economy is still growing, kinda. Here is a nice a review by one of my professors at Oregon. There is one glaring issue. The economy grew at a 2% rate, but that is mostly due to a change in business inventories. In the next few chapters we are going to spend a lot of time looking at the components of GDP. Business inventories are particular interesting, as they are also an indicator of future GDP. An increase in business inventories suggests businesses anticipated selling more today than they actually sold. Of course, the increase could be because firms are building inventories prior to the holidays. Nonetheless, when they accumulate inventories GDP increases and when they sell off their inventories GDP will decrease.

Other interesting things to note:
1) Personal consumption increased at a 2% rate.
2) Equipment and software grew at a 12% rate. Firms are making more investments, that's good.
3) Residential investment decreases at a 29% annual rate. This is a stark turn from the second quarter when residential investment increased at a 25% annual rate. Of course the first-time homebuyer credit expired in the middle of the second quarter.
4) Imports increased at a much faster pace than exports (17% to 5%)

1 comment:

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