The government announced this morning that the preliminary estimate of growth of the Gross Domestic Product for the third quarter of 2012 was a rate of 2.0%, a terrible figure. The number bounced back slightly from the 1.3% rate of the previous quarter, but the details show the third quarter number to be just as bad. First of all, business investment declined during the third quarter at a rate of 1.3%; since business investment drives future growth more than any other factor, this bodes poorly for the future. Second, exports also contracted during the quarter at a rate of 1.6%; during the recent presidential debates, we heard Obama tell us how exports were surging, but that seems to be just another falsehood from the president. Third, the biggest contributor to the increase in growth from the second quarter is that government spending and particularly defense spending surged. In little over two months, sequestration will kick in and the same defense spending will be cut dramatically. This means that the future again looks worse.
Simply put, today's report was terrible. Sure, it could have been worse, but the report made clear once again just how difficult the future will be.
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