Tuesday, May 3, 2011

The Great Depression, Part 2

I'm going to continue looking at the Great Depression from a different perspective; that of the year to year percentage change in various GDP components. Unfortunately, the BEA's data is only for annual numbers.

The above chart shows the year to year percentage change in GDP. For the years 1929 to 1933 we see a contraction, but then strong growth ensures -- 10.9% in 1934, 8.9% in 1935 and 13% in 1936. 1937 shows a decrease in the rate of growth to 5.1% -- which is still good. 1938 shows a slight contraction followed by a rise of 8.1% in 1939. What this chart demonstrates very clearly is growth did occur in the later half of the decade -- and the growth was of strong rates.

The early years of the Depression saw a strong drop in personal consumption expenditures with annual drops in the 5%-9% range. However, by 19323 the rate of annual decline was slowing and the years 1934-1937 saw good year to year growth.

The above chart shows the year to year percentage change in gross private domestic investment. Notice the collapse from 1929-1933 with terrible annual drops of 33%, 37% and 69%. That represents a near collapse. However, the years 1933-1937 show a strong rebound. Part of that is due to the low readings of 1933. But that only holds up for the first few years of the rebound; for by 1937 total inflation-adjusted domestic investment was at its 1929 level, meaning the rebound was complete.

Finally, notice the year to year percentage change in government spending was on a clear downward trajectory for the years 1930-1934. There were increases from 1934-1936; two of those years showed large increases, but one year showed only a slight increase. Also remember the middle years of the Depression is when GDP started increasing at s