Importing Our Way to Lower Growth: Five Thirty Eight on GDP

Nate Silver at the Five Thirty Eight blog must be getting bored by all the election statistics because now he's turning his attention to economic statistics. Obviously, economic data is waaaaaaay more interesting that polling data.

Using his data-crunching skills, he offers an intriguing analysis of the US second quarter GDP figure released the other week. Rather than seeing the weaker-than-expected figure as all bad, he breaks it down by category and shows that it really demonstrates the ability of one factor to skew the calculations.

As he writes (along with the authors of countless macroeconomics textbooks), GDP can be broken into four distinct categories:

1. Personal consumption expenditures, which account for 70.52 percent of G.D.P.
2. Gross domestic investment, which accounts for 12.61 percent of G.D.P.
3. Exports net of imports, which subtracts from G.D.P. because the United States imports more than it exports
4. Government spending, which accounts for 20.53 percent of total G.D.P.

Interestingly, he shows that consumers are increasing their spending (although not at a "barn-burning rate"), that government spending was responsible for over half of last quarter's growth, and that private domestic investment grew as well.

However, due to a significant increase in imports relative to exports, the net imports factor reduced 2Q GDP by 3.37%. "This is the largest decrease caused by the netting of exports and imports going back to the first quarter of 1980. In addition, a quarter-to-quarter increase in imports this large has not occurred since the first quarter of 1984, when imports increased 36.2 percent from the previous quarter. Obviously, this means it’s a fairly rare event...and shouldn't be counted on to have the same effect in the third quarter calculation."

Now doesn't that make you feel just a bit more bullish on the economy?