Now that we’ve gotten the final revision to 4Q GDP, let’s take a look at the data for the last two years to see where we’re growing and where we’re not.
The above chart simply shows the percentage change in GDP from the previous quarter. The first two quarters of 2010 were good, but then we saw a slowdown in the second half 2010. The first half of 2011 was very slow, but we see a pick-up towards the end of the year.
Overall, we’ve seen PCEs bounce all over the place. First, notice that durables goods have grown by strong amounts on a quarter to quarter basis for the last two years. In contrast, non-durable goods purchases have been weak for the last year, as have service expenditures. Remember that durable goods purchases comprise the smallest amount of PCEs, coming in about 12%. This charts tells me that people are doing more for themselves — that is, instead of hiring a landscape service, they’re mowing their own yards, etc..
Investment also provides some interesting insight. First, we see decent quarter to quarter figures in equipment and software (the gold line). However, investment in CRE (the blue line) is fairly weak. Residential investment (the green line) is terrible, save for the 2Q10 and last quarter.
Federal government non-defence spending (the green line) has contracted is four of the last six quarters, and state and local government spending as decreased seven straight quarters. The only area of government spending where we see any growth is in national defence spending.
In 2010 we see a big increase in exports in four quarters, while imports increased in three quarters. However, both export and import growth slowed in 2011.
The above data tells us some very important information.
1.) Businesses are not scared to invest; in fact, they have been investing at pretty strong rates for the last two years in equipment and software. So, can we please stop with the, “business is scared to do anything” argument?
2.) The quarter to quarter contraction in government spending at the federal and state level is hurting growth. Remember, government investment spending is a component of the GDP equation. I should also add that in a “socialist” government, we would be seeing the exact opposite.