Friday, October 30, 2009

GDP, Part III -- Invictus' Take

The money shot of yesterday's surprisingly strong GDP print was this, in my opinion:

"Motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change."

That addition -- 1.66 points -- can be found in BEA Table 1.2.2, on Line 15. Without Motor vehicle output -- Line 16 -- GDP would have come in at 1.88 percent.

But let's look at the historical record, because it tells an interesting story.

Going back to 1975 -- 139 quarters -- Motor vehicle output has averaged a +0.09 percentage point contribution to GDP. That's it. It has exceeded 1.50 percentage points -- as it did today -- in exactly 12 previous quarters. That's it. About 9 percent of the time does this line print greater than 1.50.

Further, in the 12 previous quarters in which Motor vehicle output printed 1.50 or greater, the subsequent quarter fell back, on average, to +0.14.

So, given the expiration of C4C -- and notwithstanding some extension/modification of the first-time homebuyer tax credit -- how are we going to replace the inevitable artificial goosing of GDP we saw in today's numbers?