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Home Publications Blogs Beat the Press The GDP Story: Final Demand Grew Just 0.6 Percent

The GDP Story: Final Demand Grew Just 0.6 Percent

Friday, 29 October 2010 10:20

Come on folks, we had the second largest inventory build-up in history. Pull that out and final demand grew at just a 0.6 percent annual rate.

Does anyone thing that inventories will continue to grow at this rate? This means that instead of adding to growth inventories will subtract from an economy that has almost no forward momentum. This is all GDP accounting 101. This should be the headline on the 3rd quarter numbers.

Comments (12)Add Comment
..., Low-rated comment [Show]
written by Fed Up, October 29, 2010 1:19
Kind of another way of asking it, but what does it mean if inventory gains contributed 1.4 percentage points to the third-quarter growth and real final sales were .6 percentage points?

Were real final sales 1.0 precent last quarter?
written by AndrewS, October 29, 2010 5:14
"the deficit...is the real reason for no growth"? Not the lack of demand from a consumer class whose wealth has been destroyed? These broke folks are going to start spending once the federal budget is balanced you presume? With what money?

So what will you give them? (And save jobs too)
written by Jorge, October 30, 2010 7:44
More stimulus seems to be needed. But politicians have an amazing way of abusing such necessities. So think of a way to put a price on the potential for the increased indebtedness.
Pull back somewhere else too.

For instance, acknowledge that we should not add to some of the environmental restrictions at this time. The ones that would cost the most jobs, WAIT on them. That would not be an unreasonable compromise.
written by skeptonomist, October 30, 2010 9:37
I think that supply-side stimulus must cause businesses to increase inventories in anticipation of better profits from tax cuts and lower interest rates - that's how it works. Considering that almost half the 2009 stimulus was tax cuts and all of monetary policy is supply-side, increased inventories could be a sign that these things are working. It could also be an indication that businesses are not holding back because of uncertainty about regulation, etc. Of course inventory build-up can also be a sign of decreasing demand, or demand growing slower than supply as Dean intimates. Demand should be measured directly, not as a remainder from GDP.
written by PeonInChief, October 30, 2010 11:24
I think they're just desperately hoping that people will go out and spend for Christmas. Ain't gonna happen.
written by libhomo, October 30, 2010 12:43
... if the GOP wins the House and Senate, a lot of people will cut back in sheer terror.
We caught it on The Economic Populist
written by Robert Oak, October 30, 2010 12:43
In this write up on Q3 2010 GDP.

That is the story, the problem is most people not only go to sleep when they see a number, even when you give them lots of graph eye candy, maybe it's not spelled out enough for them. GDP was pathetic, although domestic consumption was higher, of course imports grew at a less accelerated pace.
For Whom The Bell Tolls?
written by Scott ffolliott, October 30, 2010 9:33
Let's then begin to talk about the undeserving rich.

“. . . the ever memorable and blessed Revolution…A city cemetery could contain the coffins filled by that brief Terror which we have all been so diligently taught to shiver at and mourn over; but all France could hardly contain the coffins filled by that older and real Terror -- that unspeakably bitter and awful Terror which none of us has been taught to see in its vastness or pity as it deserves.” -- Mark Twain
Our biggest export could be food
written by ljm, October 30, 2010 11:13
Our nightly news had a story with a local farmer about the cost of food rising much higher at the grocery store. He said, "the housewife is competing with the overseas market." He said with two big corporations in the food business and far fewer family farmers than there used to be, food goes to the export market. It's about satisfying shareholders. It's also about people who try to corner certain food markets in commodities, like the guy who di that with cocoa. The cost of food ends up being much higher as a result.
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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.