Economists said the massive stimulus injected by the U.S. government, such as the cash for clunkers program that lifted car sales, helped boost consumer spending. Since the federal stimulus reached its maximum effect in the third quarter and the unemployment rate remains high, there's uncertainty over the sustainability of the recovery.
Thursday, October 29, 2009
Is the GDP growing?
Well, the financial headlines point to a robust 3rd quarter, with GDP growth of 3.5%. Any port in a storm! However, you have to remember what makes up "Gross Domestic Product," and when you dig below the surface, it's not so good and may only be a blip. GDP is a rough measure of economic activity made up of consumer spending, investment by businesses and government spending. The seemingly good news is that a BIG chunk of the growth was consumer spending: 2.36%. But, what drove that? Well, there was the "Cash for Clunkers" fiasco - that was 1.7% of the total - per the Wall Street Journal this morning:
And so where does the money that counts for almost half of the so-called "growth" come from? Well...you: from CNN Money: "Cash for Clunkers cost taxpayers $24,000 per car." Wait, $24K per car? That's damn near the price of a pretty well loaded Toyota Camry!
So, is the economy improving? Let's ask the folks - here are the results of an online survey over at CNN moments ago:
That's right - 64% of CNN - not those evil FOX people - think there is no recovery in their area. Folks, we are going to have to pay the piper with all this Federal lard being slathered over this economy and I suspect the American people know it.