posted on Mar, 30 2006 @ 10:54 PM
Today's final 4th quarter 2005 GDP report came in showing a 1.7% annualized growth rate for the quarter. Though this decline is concerning, the
actual breakdown of contributions is even more concerning. The total increase in GDP during the 4th quarter was only $46 billion in chained 2000
dollars. (i.e., it was adjusted for inflation using the government-controlled BEA's own secret formula.)
Normally, consumer spending is 2/3rds of economic activity. This was not the case in the 4th quarter, however. In fact, personal consumption
expenditures accounted for only $17.5 billion of that growth, or only 38%. The biggest contribution came from capital investment (overinvestment?) The
total gross private domestic investment was $72.5 billion, or over 4 times as much as consumer spending. Of this investment, $51.2 billion is
accounted for as increase in private inventories. In other words, $51.2 billion of the contribution to that $46 billion came from unsold goods
(surplus.) With a GDP growth as low as it was, and an increase in unsold goods greater than the GDP increase, there are no signs that this is an
economy that is "strong, and getting stronger." Producing 4 times more goods than Americans can purchase is a recipe for disaster. Since American
consumers account for 80-90% of the purchase of American goods, this is especially concerning.
To complete the picture, the subtractions from the total GDP should be mentioned. Our 4th quarter trade balance was -$37.7 billion. Government
spending declined $4-6 billion. (I'm giving a range, since the published numbers don't add up perfectly.)
Below is a modified copy of a chart showing this information from the U.S. Bureau of Economic Analysis:
The above chart can be found in its entire (unreadable) form at: BEA-GDP
Our economy is in MAJOR trouble if we continue to prop up our GDP with unsold inventories and overinvestment, instead of consumer spending. Our
economy cannot continue to devote only a 38% fraction of GDP to consumer spending. Unsold inventories are worth nothing if they aren't sold. This is
a sustainable course.
Economic Patriot Forum
The economy needs balance between the "means of production" & "means of consumption."