The release read:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.0 percent in the third quarter of 2012 (that is, from the second quarter to the third quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.This was a big swing upward from Q2. In the second quarter, real GDP increased 1.3 percent. Thus the 2.0 number implied that the economy was on an upswing.
Where did the improvement come from. The report went on to inform (my highlight):
The acceleration in real GDP in the third quarter primarily reflected an upturn in federal government spending, a downturn in imports, an acceleration in PCE, a smaller decrease in private inventory investment, an acceleration in residential fixed investment, and a smaller decrease in state and local government spending that were partly offset by downturns in exports and in nonresidential fixed investment.[...]
Real federal government consumption expenditures and gross investment increased 9.6 percent in the third quarter, in contrast to a decrease of 0.2 percent in the second. National defense increased 13.0 percent, in contrast to a decrease of 0.2 percent. Nondefense increased 3.0 percent, in contrast to a decrease of 0.4 percent.According to BEA data, federal government expenditures contributed 72 basis points of the total 2.0 percent gain in GDP for Q3. In comparison Q2, government expenditures actually shrank GDP growth by -0.14.
Did the Obama Administration stuff federal government purchases into Q3 to show a growing economy for the benefit of the president? The data seem to indicate that's exactly what occurred. While, the underlying economy appears to be growing as a result of Bernanke's money printing, one sector of the economy collapsed, according to the Q4 numbers released today. From the BEA:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 0.1 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis.However, as many analysts noted, this was an odd decline:
Business investment in equipment and software rose 12.4 percent, among the larger increases in the current expansion. Residential investment (housing) posted a solid 15.3 percent increase. And consumer spending was up 2.2 percent, driven by strong purchases of durable goods.
The strength in these three categories is generally more typical of the start of a recovery, not 3.5 years into it.What gives?
The BEA clues us in in their release (my highlight):
The decrease in real GDP in the fourth quarter primarily reflected negative contributions from private inventory investment, federal government spending, and exports that were partly offset by positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.[...] Real federal government consumption expenditures and gross investment decreased 15.0 percentin the fourth quarter, in contrast to an increase of 9.5 percent in the third. National defense decreased 22.2 percent, in contrast to an increase of 12.9 percent. Nondefense increased 1.4 percent, compared with an increase of 3.0 percent.
Holy Mitt Romney! According to the BEA, federal government spending had a negative 133 basis point impact on Q4 growth. If if wasn't for the decline in federal government spending, the Q4 growth number would have come in at a positive 1.32%, not the 0.1% decrease. So what was behind the decline in federal spending, did we win a war in Q4 and the military-industrial complex lobbyists decided to end schmoozing the Penatgon, which resulted in a non-neocon like 22% decline in defense spending?
Or was the spending stuffed into Q3 to help the President's election campaign?