Friday, October 29, 2010

More on GDP

The chart below shows the draw down (the percent below the previous peak) of each sub-component of GDP (C + I + G + NX - NI). What this shows is that while things are bouncing back, outside of government spending all other areas are still below their previous peak (consumption is slightly down).

All four of these sub-components have been below the previous peak for 9 straight quarters. Is this really so different?

Compared to the last three recessions... yes.

During the early 00's recession we only had this happen during one quarter, during the early 90's recession this didn't happen once, and during the early 80'd we saw a similar situation for about 2 quarters. We have to go back to the recession of the mid 1970's when this situation occurred 11 straight quarters.

During that time there was stagflation, which is not a good thing, but at least it prevented nominal debt from accumulating in real terms; not the case during the most recent disinflationary period.

Source: BEA