GDP is down because of a 17% drop in residential investment. Consumer spending is up 3.1%, “and the value of imported goods accelerated sharply to a 7.8 percent annual rate of increase in the third quarter, more than three times the second quarter’s 1.4 percent increase.”
“Nonresidential investment, which measures business spending, rose at an 8.6 percent annual rate in the third quarter, close to double the second quarter’s 4.4 percent. Consumer spending, which accounts for roughly two-thirds of national economic activity, increased at a 3.1 percent rate, up from 2.6 percent in the second quarter.” This makes sense, since business spending is a recipient of consumer spending at the front end of the chain. It also explains why we’ve had so many good earnings reports.
This raises a few questions. If residential construction is down 17%, why haven’t we heard of more layoffs and lower profits among companies which make copper, pipes, windows, carpet, and retailers which sell this stuff? How long can the consumer uise debt from credit cards and homes, to buy imported goods, in the face of declining home prices? Since consumers are buying mainly goods from Asia, who is benefitting from the purchases of these products? Asian manufacturers and US retailers, or US companies overseas?
Did our past recession happen in this split way too? Durable goods like autos and houses are declining (signaling a recession) yet consumer spending via debt is increasing?
