This Isn’t Good

by digby

From Meteor Blades:

Third-quarter growth was significantly weaker than previously reported, the government announced Tuesday. As measured by gross domestic product, which is seen by many as an increasingly flawed gauge that overstates the health of the economy, the revision showed that growth was still well into positive territory compared with four previous quarters of negative growth.

The initial estimate in October for annualized third-quarter GDP growth was an encouraging 3.5%. Last month, that figure was revised downward to 2.8%. Today, the figure was again revised downward by the Commerce Department’s Bureau of Economic Analysis, this time to 2.2%. This was well below the experts’ consensus of 2.7%, and below the level that even the most pessimistic expert had predicted.

Of that 2.2% increase in GDP, 1.45% came from the administration’s Cash-for-Clunkers program, which provided $3 billion in consumer subsidies for buying new, more fuel-efficient cars. Adjusted for inflation, GDP this year is down 2.8% over 2008.

Goldman Sachs’ Edward F. McKelvey wrote:

This was a much larger than normal revision for the third pass on a given quarter, knocking what once was a fairly robust 3.5% bounce down to a mediocre 2.2% (from 2.8% prior to this revision). All sectors except the trade balance — a focal point of last month’s downgrade — saw some downward revision. Revisions were particularly deep in business investment — to 5.9% from 4.1%, worth two tenths of the revision — and in inventories (also worth nearly two tenths).

The latest revision, which is based on more complete data than the previous estimates, was mostly a result of downward calculations of nonresidential fixed investment, private inventory investment, and personal consumption expenditures. Building of new office and retail commercial space dropped more than previously estimated and state and local government spending was worse, falling by 0.6 percent.

Not good.

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