RebelCapitalist: Financial Information for the Rest of Us

GDP Increases 3.5% in Third Quarter

Oct 29, 2009 | By: Mr_Blue | Comments | Permalink | Tags: economy, gdp

The Bureau of Economic Analysis announced today that Real Gross Domestic Product - the output of goods and services produced by labor and property located in the United States - increased 3.5% in the third quarter. Good news but we have a long way to go.

A couple of things to point out regarding Real Gross Domestic Product announcement: 1) this is an estimate that can be revised at a later date and 2) the “Real” part means that the Gross Domestic Product number was adjusted for any price changes (inflation/deflation).

The Good News: The economic stimulus passed in February 2009 seems to be working. It has boasted consumer spending due to tax incentives (Cash for clunkers & First-time buyer housing tax credit). The other positives were exports, private inventory investment, federal government spending, and residential fixed investment.

The Bad News: Included in this announcement was this:

Disposable personal income decreased $20.4 billion (0.7 percent) in the third quarter, in contrast to an increase of $138.2 billion (5.2 percent) in the second. Real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent.

Disposable personal income is gross income minus income tax on that income. The other bad news, which was not covered in the announcement, is obviously unemployment is still very high. Economists will constantly remind us that employment lags behind economic growth. We will see if that is true with this Great Recession.

Good luck.