Good News for Distributors in GDP Data

Last week, the government released preliminary estimates of U.S. Gross Domestic Product (GDP) for the third quarter of 2009. The economy grew by an unexpectedly strong 0.9% versus the second quarter, which translates into annualized growth of 3.5%.

Both consumer spending and business investment increased, providing further evidence that the green shoots are beginning to sprout for real. Fourth quarter GDP growth is likely to be lower because certain one-time supports—cash for clunkers, first-time homebuyer credits—are phased out.

Although the recovery will remain uneven until unemployment starts to decline, there is some good news for wholesaler-distributors. Tune in my 2010 Economic Outlook for Wholesale Distribution webinar for more detailed forecasts

The chart below highlights selected components of U.S. GDP. Click the chart to enlarge it.

Note that these data show the annualized percentage change from the previous quarter. In other words, the data show the percentage change from 2009:Q2 to 2009:Q3, multiplied by 4.

• Consumer spending grew for the first time since mid-2008. The cash-for-clunkers program added about one percentage point to growth.
  
  
• Residential investment increased for the first time in four years, although total residential investment is 54% below its peak of four years ago. The tax credit for first-time homebuyers contributed to the strong performance. The revenues of building materials distributors are closely tied to residential investment. See Slow Recovery Ahead for Building Materials Distributors.
  
  
• Business spending on equipment and software, which is about three-quarters of fixed nonresidential investment, also grew as credit conditions improved and business confidence improved. This growth provides another positive data point for industrial and commercial wholesale distribution sectors. See Growth Ahead for Industrial Distributors.
  
  
• Exports of goods were a bright spot for the U.S. economy, driven by a combination of the depreciating dollar and a faster recovery in other countries. Growth in exports are good news for distributors selling to export-oriented manufacturers.
  
  
• Inventories declined again, subtracting from growth. However, inventories will add to growth in future quarters as businesses (includes wholesaler-distributors) begin restocking.

Register for my November 19 webcast to hear my outlook for major business markets and my forecasts for the 19 major wholesale distribution sectors. In the meantime, please enjoy this brief video introduction from yours truly: