The Commerce Department revised GDP growth for the third quarter of this year down, again.
The latest number is an increase of 2.2%. A month ago the number was dropped to 2.8% from the government’s original figure of 3.5%.
The data shows that the American economy is barely growing and the the sharp rebound that economists have been describing recently is a mirage.
Consumer activity in the period from July 1 to September 30 was much less robust than expected. It is almost certain that unemployment, which was still rising very rapidly during the quarter, undercut both individual and corporate spending.
The numbers are particularly bad for the federal government which is expecting a sharp move up in GDP in the current quarter and in 2010 to increase tax revenue. That would allow the Treasury to begin to narrow the size of deficits and decrease the growth rate of the national debt. The government’s other efforts to help the economy including the $787 billion stimulus package and programs to slow housing foreclosures has been largely failures up until now.
The new 2.2% number shows that the economy has not responded at all to the stimulus and raises the thorny issue of how bad Q4 GDP will be. Weak consumer spending for the holidays could move growth improvement back to the 1% level.
Douglas A. McIntyre
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