Yesterday with great fanfare, President Obama’s economic team announced that the
While it is good news that the GDP rose, it is important to understand the impact of two artificial stimuli that dramatically affected the rosy news. It is also important to consider how small privately held businesses did for the quarter since small business creates nearly 50% of all GDP.
Out of the 3.5% increase in GDP, nearly half of it came from two government stimulus projects that were targeted at consumers. Cash for Clunkers was the wildly successful program that allowed
The second big artificial stimulus affecting the high GDP was the federal government program offering first time homebuyers an $8,000 tax credit. Home sales were significantly up for the quarter and those sales affected the GDP number. There is effort in congress right now to extend the home buying credit past the December 31 deadline, so that stimulus may continue.
So if you are an automaker or selling real estate, you have a temporary reason to be happy.
Several notable economists not tied to the Obama administration estimate that the affect of the above mentioned artificial stimulus accounted for about one half of the total GDP increase. If that is true, the forth quarter ending December 31, 2009 should be substantially weaker, and maybe even show a negative GDP growth rate. In my way of thinking to see if you have a trend you need at least three data points that line up, so it may be the middle of 2010 before we really know whether the end of the recession occurred over the summer as some on TV suggested last night.
According to Sageworks, Inc. a company that tracks real time financial data for private
The comparison chart below shows the industrial segments (taken from private company data) for the third quarters of 2007, 2008, and 2009. These industrial segments of our economy did not grow over last year
2009Q3 Selected Industry Sales Changes
It has historically been private investment, private industry, and small business that have taken the