GDP release

The Bureau of Economic Analysis released the GDP report for the third quarter today. It breaks down growth into categorical components.

First, the good news. GDP increased at an annual rate of 2.8 percent in the third quarter. This included increases in lots of sections:
-Equipment and Software increased 2.3 percent
-Real Personal Consumption expenditure increased 2.9 percent
-Real residential fixed investment (houses) increased 19.5 percent (inflated due to tax incentive)

Now, the bad news. Motor vehicle output added 1.45 percentage points to the overall number, and now that the cash for clunkers program is over that is going to disappear. Plus, we can't discount the impact that the cash for clunkers program has had on other industries (car dealer makes money, buys things, others make money, buy things, etc.) We also saw a decrease in real nonresidential fixed investment (business investment) of 4.1 percent

Two pieces of information that hurt the numbers, but are good signs:
-Net Exports is decreasing: increases in both exports and imports, but imports increase is larger
-Inventories are decreasing: When inventories increase, it adds to GDP (as though the company purchased them). However, decreasing inventories shows that in the big picture people are buying more than is being produced. It signals likely increases to come in employment.

Last, actual federal government spending increased 8.3 percent. Take this how you will: it definitely helps the economy, but it is unsustainable and may distort markets away from their efficient equilibrium (i.e.- building a "green energy" industry, despite the lack of a supportive market).

Finally, the analysis. This release looks like a mixed bag, maybe even beginning to look positive. December's numbers will tell us a lot.