Sunday, November 11, 2012

USA GDP an Unsustainable and Overstated +2.0%

Bureau of Economic Analysis: Gross Domestic Product

The Bureau of Economic Analysis released the first (advance) estimate of Q3 2012 GDP which was +2.0% quarter over quarter (annualized), an increase from the prior Q2 2012 estimate of +1.3%, and a drop from Q4 2011 of +4.1% peak. The total GDP reached an all-time high $15.78 trillion annualized. The GDP has increased quarter over quarter for 13 consecutive quarters, since Q3 2009. Since the Great Recession, growth rates have ranged from a near-recessionary +0.1% in Q1 2011 to a robust +4.1% in Q4 2011.

The latest GDP data indicates the economic growth profile is unsustainable long-term because government spending was +0.71% of the +2.0% total. This public sector spending consisted of federal spending of +0.72% and state & local spending of -0.01%. A significant portion of that federal spending was borrowed, not taxes collected and disbursed. So economic growth was leveraged by borrowing and increasing USA sovereign debt at the current artificially low interest rates held down by the Federal Reserve.

A decline in exports pulled down GDP by a moderate -0.23% and a slowing of imports raised GDP a meager +0.04%. The old faithfuls of consumer spending on goods (+1.03%) and services (+0.39%) kept the economy going. Private domestic investment of a slim +0.07% was the final negligible boost to USA economic growth. Rounding was -0.01%.

The latest GDP data indicates economic growth is overstated because inflation, and therefore the GDP deflator, was a +2.8% seasonally adjusted annual rate. Is inflation really just +2.8%? If you think so, then the GDP deflator is accurate. If you disagree, then the Q3 2012 GDP of +2.0% is overstated accordingly by the amount of additional inflation that should be accounted for (some estimates are as high as 6%+).

USA GDP by Percentage

USA GDP by Dollars

There is a more important chapter developing in the Story of America. The annualized GDP is $15+ trillion and the funded national debt is now $16+ trillion. Yes, the USA funded debt exceeds GDP as the federal budget deficits continue uncontrolled. The funded sovereign debt to GDP ratio has now exceeded 100%. The unfunded debt is much higher and Washington pretends that doesn't exist. An updated review of this USA milestone and the upcoming American Day of Reckoning is reviewed periodically:

America: Land of Indefinite Corporate Power, Debt, Detention, Quantitative Easing, Wars

USA Sovereign Debt Now Exceeds GDP: Greetings From Big Brother


Seeking Alpha