"Now look at the Q3 GDP report from leading to lagging sectors"

[ProSense]

Random Thoughts on the Q3 GDP Report

by CalculatedRisk

After the Q1 GDP report was released, I wrote: http://www.calculatedriskblog.com/2009/04/gdp-report-good-news.html">GDP Report: The Good News. The headline number in Q1 was ugly, but there was a clear shift in the negative GDP contributions from leading sectors to lagging sectors.

Here is a repeat of the table from that earlier post showing a simplified typical temporal order for emerging from a recession:



(1) In recent recessions, unemployment significantly lagged the end of the recession. That is very likely this time too.

Now look at the Q3 GDP report from leading to lagging sectors:

•Residential investment was up at a 23.4% annualized rate, breaking a streak of 14 straight quarterly declines, and contributing 0.53 to the percent change in GDP.

•Personal Consumption Expenditures (PCE) was up at a 3.4% annualized rate, and contributing 2.36 to the percent change in GDP.

•Investment in Equipment & Software was up slightly at a 1.1% annualized rate.

•Investment in non-residential structures was down 9.0% at an annualized rate.

This is exactly what I'd expect a recovery to look like.

Unfortunately ... the two leading sectors, residential investment (RI) and personal consumption expenditures (PCE), will both be under pressure for some time. The Census Bureau report this morning showed that there are still far too many excess housing units (homes and rental units) available. There cannot be a sustained recovery in RI without a boom in new home sales and housing starts, and it is difficult to imagine a boom in new home sales with the large overhang of housing units.

link

Recovery has to start somewhere. As hard as it is to imagine, so was getting to this point.

[Kurt_and_Hunter]

1. Yes, this is what a recovery looks like

But since real estate (and probably personal consumption, given high unemployment) will remain under pressure the government will continue to have to pick up an above-average amount of slack, even during a phase of GDP recovery.

I recc'd this because it's a good piece from someone I respect.

[ProSense]

2. "But since real estate will remain under pressure " There is always a "but."

And there are a lot of things that can happen to change that "but" to another "but."

[Kurt_and_Hunter]

4. I am saying further stimulative action is a good idea, despite the recession being over

That's not gloom for the sake of gloom, it's being left-of-center.

Heck, the NYT just ran an editorial calling for more stimulus and they're not exactly the Daily Worker

[Oregone]

3. "the government will continue to have to pick up an above-average amount of slack"

Haha. Good luck with that. In this political climate?

Hopefully thats on the horizon, or this could just be a bump. Here's to hoping reasonable levels of unemployment aren't more than 5 years off