Image source: Pixabay
 

Given BAC’s news earlier that businesses and consumers are slowing their purchases, this bears close watching over the coming months.

“Davidson” submits:

US Real GDP reported this week has some concerned that the economy is slowing. The series that is more important is the Real Private GDP by my analysis. The logic goes as such:

1)      Real GDP includes Government Expenditure and Investment

2)      Government Expenditure and Investment is mostly non-productive with some value accruing for roads, bridges, port infrastructure, the rest military and transfer payments with government and ‘political’ support overhead that has no profit outcome nor increases to standards of living from innovation.

3)      Subracting Govt Exp&Inv from Real GDP gives the amount(roughly) of economic growth from the Private economy, REAL Priv. GDP, which is depending on innovation and does all the work to advance standards of living

It is the Real Private GDP which supports our economy and government’s spending. If this is doing well then the entire structure is doing well. The current Real Private GDP YoY growth is 2.7% and in line with the growth trend in place since May 2009. This is a trailing data series but it puts to rest at the moment the fear that government spending has overwhelmed the US economy with unproductive output making US Real GDP a false indicator of economic growth. While some feel this to be true, the fact is govt spending is a little higher but still in the 17%+ range of recent history. US debt however is a different story being at record levels.

The current fear of growth only coming from government spending is not supported by this data even if it is reported in 5mos arrears.

More By This Author: