Mostly Bad News in Q3 Snapshot of U.S. Economy

Last week’s report on third quarter Gross Domestic Product (GDP) confirmed what many wholesaler-distributors are feeling – economic growth was anemic. As the Wall Street Journal noted, these data will affect the the policy options available to our new President. See Data Stoke Campaign Battle Over Economy.

The media focused on the headline GDP number, but there is some good news for wholesaler-distributors and their suppliers buried in the underlying components of GDP. I’ve updated the 2009 Forecast landing page with the agenda so you can see how these topics will fit into next Thursday’s webcast.

Two semi-bright spots:

• Exports remain a bright spot for the U.S. economy, although the rate of growth slowed from the second quarter of 2008. Export growth will slow in 2009 due to a global slowdown. But economic growth remains robust in emerging economies, so exports will remain an ongoing bright spot for the U.S. economy – and for wholesaler-distributors that service and sell to domestic exporters.
• Government spending also made a positive contributor to GDP. Much of the increase was attributed to Federal defense spending, which was up 18.1% at an annualized rate. Spending tends to highest in the last quarter of the government’s fiscal year as departments exhaust their budgets.

Now the (very) bad news:

• The decline in consumer spending (durables and non-durables) was the sharpest quarterly drop since the second quarter of 1980.
• Residential investment has declined by 43% since its peak in the fourth quarter of 2005, reflecting the aftermath of the housing bubble.
• Business spending on equipment and software, which is about three-quarters of fixed nonresidential investment, declined for the third consecutive quarter due to credit conditions and overall economic uncertainty.
• State and local government spending increased at an annualized rate of only 1.4%, reflecting the weakening financial situation of the states.

As a reminder, these data show the annualized percentage change from the previous quarter. In other words, the data show the percentage change from 2008:Q2 to 2008:Q3, multiplied by 4. These data give a good indication of the current rate of change but are not directly comparable to more common year-over-year growth rates.

Don’t forget to email me your questions for next week’s webcast. Sign-ups have been extraordinary, so make sure you stay up-to-date with your competitors by participating in this data-packed and insightful webcast.

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Speaking of snapshots, I’m sure all Americans will appreciate my wife’s excellent Halloween costume regardless of your political leanings. As you can see, she dressed up as … Tina Fey? And of course she is wearing McCain fine gold earrings from QVC!