Tuesday, October 30, 2012


The markets were closed yesterday, so there is no market update.

Let's start with the good news: US GDP is now higher than it was before the recession (top chart).  Here's the bad news: growth has been weak (bottom chart).  While readers of this blog understand that growth from a financial crisis is typically slow, this is obviously a concern to policy makers and fodder for political issues.

Let's look at where growth came from in the 3Q.  The above chart shows the contributions to the 2% growth rate.  Here, we see two big contributors: personal consumption expenditures and government spending.  On the down side, investment was very weak (most likely a result of already strong investment this cycle and the fiscal cliff) and exports provided a mild negative reading.