GDP revision

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Cancel 2016.2

The Almighty
http://www.bloomberg.com/apps/news?pid=20601068&sid=a_AM5zPuPp7w

"Gross domestic product grew at a 2.8 percent annual pace, the Commerce Department said today in Washington, compared with its prior estimate of 3.5 percent."

given that most of that 2.8% came from the failed cash for clunkers fiasco... that is not a good sign that we are indeed recovering.

Add to that the projections that jobs are not going to be coming back very fast next year and it makes for a rocky road for the next 12 months or so.
 
Cash for clunkers was a 4 billion dollar program. The GDP of the United States is about 14 trillion. 2.8% of 14 trillion is 300 billion. So cash for clunkers was apparently responsible for most of that growth when it's almost a hundredth of the amount of GDP growth. Makes sense.
 
Watermark said:
Cash for clunkers was a 4 billion dollar program. The GDP of the United States is about 14 trillion. 2.8% of 14 trillion is 300 billion. So cash for clunkers was apparently responsible for most of that growth when it's almost a hundredth of the amount of GDP growth. Makes sense.
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Did you read that article?

It was the "pace" for the quarter, not the full amount. The GDP did not grow by nearly 3% in that quarter. In order to grow at that "pace" it is only 10.5 Billion in increase in order for it to be the "bulk" of the increase for that quarter.... The cash incentive to buy cars (and houses) drew enough consumer interest to raise the GDP at that "pace" for that quarter. (That doesn't mean I think that the car and house incentives are bad).
 
Buffalo Soldier said:
Did the world turn upside down. Freak owned by watermark.
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Lay down the ganja toppy... He of course didn't think through his response very well.

Auto sales were up in the quarter by over 150%.

Water is taking the government incentive and using that in his calculation. That incentive did not cover the full price of the vehicles. The FULL price of the vehicles is included in the GDP numbers. Auto sales in the quarter accounted for about 1.65% of GDP. That means less than 1.2% came from the rest of the sectors in the economy. So yes, the spike in auto sales did (as I stated) account for the bulk of GDP growth in the quarter.

In addition, that huge spike is likely to be followed by a huge slowdown in auto sales for the following quarter. That will likely have a negative effect on GDP for the fourth quarter numbers.
 
Watermark said:
And I won't even get into the fallacy of treating government spending as if it's not "real" growth.
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No one said it wasn't real growth. The problem is that it is merely a transfer of growth from one time period to another. That money has to be accounted for eventually.

Government spending can be beneficial when consumer and corporate spending dry up. However, it is more beneficial to see the government spend the money in ways that will boost employment for longer periods of time. Creating jobs that will last a few years (while the private sector recovers). This would take pressure off of the unemployment lines at the most opportune time.

The reason the auto program was a fiasco is it did little to add jobs to the economy and it simply gave tax breaks to people who are not struggling right now. (for the most part)
 
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