Where’s the economic growth?
Gross domestic product grew by 2.5 percent in the first quarter of 2013, according to the The Bureau of Economic Analysis, falling short expectation of 3 percent growth or more.
If you’re looking for good news, the number is up from the meager 0.4 percent growth in the fourth quarter of 2012. So we’re looking at healthy growth compared to what we’ve seen recently. Then again, what we’ve seen recently is stagnation.
Pushing growth was consumer spending (around two thirds of GDP) which was on a 3.2 percent pace, the fastest since the final quarter of 2010. But Americans incomes also dropped (thanks to the end of the payroll tax cut and other factors) at a 5.3 percent rate so consumer will be less eager to spend.
“Households are drawing down savings, and they are borrowing to continue spending,” Steve Cunningham, director of research and education for the American Institute for Economic Research told CNN. “That won’t last forever.”
“A lot of the growth in the first quarter came from factors that are not going to continue,” Scott Hoyt, senior director of consumer economics at Moody’s Analytics told Market Watch. “There is not a lot of good news in this report when you scratch under the surface.”
Spending on equipment and software rose, a big measurement of private sector growth, a modest 3 percent pace, falling from an 11.8 pace at the end of 2012. Also, not good.
One thing is certain. You will be subjected to a squall of pieces from the usual suspects holding “austerity” culpable for holding back economic growth. The GDP report showed a government sector (federal, state and local) fell at 4.1 percent rate. If only the Obama Administration were permitted to … well, to do what exactly is never really discussed.
If given a free hand, Washington would probably be talking about another stimulus (If nearly a trillion did so little, what do you suppose a scaled back stimulus would achieve? Most Democrats have no appetite for a sizable new proposal) and taxing the wealthy at some marginally higher rate on their private jets (Is there serious person who believes that adding a few billion in revenue would make a substantive difference in growth?).
Why are we spinning out wheels for four years? You can watch mainstream econ writers wrestling with their preconceived notions; we need more inflation, more spending, more debt, more stimulus … it is never: hey, let’s free the private sector of some of the costs and burdens associated with regulations or taxation. There wouldn’t be a need for an abrupt government slowdown (not that this is one, mind you) if the private sector were generating the kind of tax revenues to sustain busywork for government workers.
Note: The Commerce Department’s Bureau of Economic Analysis is going pad the country’s total output when it starts measuring U.S. gross domestic product by adding the value on intangibles into the mix. The BEA will include things like spending on “artistic originals” — movies, songs, recordings, books and long-running television programs.
Though I like the idea, and the overall GDP figure will creep up, what matters is the rate at which the economy is growing — or contracting. So, as a measurement, it won’t matter much.
Follow David Harsanyi on Twitter @davidharsanyi.
(Chart from Wall Street Journal)