Saturday, July 30, 2005

General Glut: GDP & Unsustainable Trends

General Glut has a blog that focuses on the economy in general. Here is an excerpt regarding the GDP and the housing situation:

The good surface news on the US economy just keeps on coming. Today the Commerce Department reports that second quarter real GDP growth was a robust 3.4% -- and if wasn't for the big, big drop in private inventory investment during 2005:II, the overall figure would have been even higher.

First, residential investment continues on high burn. Not only did it grow 9.8% in the second quarter (following an equally hot 9.5% rate in 2005:I), but overall residential investment now contributes 6.0% of overal US GDP -- the highest quarterly tally since 1955. That it, the present US economy is the most dependent on housing construction in fifty years.

In sum, a lot of what makes this GDP report good are clearly unsustainable trends. But then, as a country our motto is clearly "Eat, drink, and be merry, for tomorrow we die."
General Glut is right. The unsustainable trends are similiar to a thunderstorm on the horizon that is coming your way. It may be sunny now, but just wait a few hours. Or in the case of the US economy it could be a few months or a couple of years till we enter into a recession.


  1. I am extremely uncertain as to where in the report you're getting getting that 6% number. Please elaborate. I literally just cannot find it.


  2. DMZ,

    Fair point. Look at the second table 3A.

    Total GDP is 12,376.2 (in Billions, seasonally adjusted).

    Residential (under fixed investments) is 740.1 .

    Divide 740.1 / 12376.2 and you get 6%.

    Thus residential investment contributes 6% to total US GDP for the second quarter 2005.