Americans rediscovered their taste for consumption: personal expenditures
grew by an annualised 3.4 per cent after falling in four of the previous six
quarters. Durable goods were swept up, with sales higher by an annualised 22 per
cent, but services and nondurables as well grew at respectable if modest speeds.
Businesses and households also started investing again: although non-residential
construction fell for the fifth quarter in a row, equipment spending rose for
the first time since 2007, and residential investment jumped by an annualised 23
But this spending spree is brittler than one would like. The durable goods
spurt – even as disposable incomes fell – was powered by a car scrappage scheme
that borrowed GDP from the future more than anything else. With motor vehicles
excluded, output grew by only 1.9 per cent. Up to half of that in turn consisted
of businesses rebuilding depleted inventories – a sign of optimism, but also,
like cash-for-clunkers, a one-off boost to output that will not persist.
There you have it folks. Suddenly the numbers are not so stellar, as first reported. Those who have ears, let them hear.