3.4% if you can keep it
The good surface news on the US economy just keeps on coming. Today the Commerce Department reports that second quarter real GDP growth was a robust 3.4% -- and if wasn't for the big, big drop in private inventory investment during 2005:II, the overall figure would have been even higher.
Here are a few tidbits that jumped out at me from this report.
First, residential investment continues on high burn. Not only did it grow 9.8% in the second quarter (following an equally hot 9.5% rate in 2005:I), but overall residential investment now contributes 6.0% of overal US GDP -- the highest quarterly tally since 1955. That it, the present US economy is the most dependent on housing construction in fifty years.
Second, exports were up and imports down in the second quarter. This was the first quarter in two years that the real trade deficit did not increase. Of course, there is every indication this is going to turn around rather quickly in the third quarter, probably as soon as July.
Third, American consumption has finally all but outstripped American income. In the second quarter American consumers managed to not spent a mere $18bn of their income garnered. You also have to go all the way back to 1955 to find a number that low -- but that's in nominal terms. In 2005:II, US savings out of income totaled a nearly invisible 0.2% (in 1955:I it was 6.4%). And no surprise in that over the last year total US disposable personal income has risen 5.1% (in nominal terms) while total US personal consumption expenditures are up 6.5%. This marks the second quarter in a row that personal savings was below 1.0%. Pretty soon the US consumer will be tapping into his/her savings to spend -- except that as Americans we have no savings except the equity in our houses, and we've pretty much tapped them dry.
In sum, a lot of what makes this GDP report good are clearly unsustainable trends. But then, as a country our motto is clearly "Eat, drink, and be merry, for tomorrow we die."