That´s the message I got from these two Karl Smith´s posts from today. The first is an analysis of the contribution to growth of the different components. It concludes with the view:
All-in-all it looks decent.
Maybe it is that we´ve lost all sense of “decency”.
And he follows that up with what I thought was an enigmatic post called “”The turn illustrated”. I really don´t know if he´s being sarcastic or really thinks “it looks decent” because growth has come up to levels experienced before the crisis. Below a version of his illustration, in which I include the growth of a measure of aggregate demand.
The point, as illustrated in the next chart, is that the economy is still languishing deep inside the hole into which it dropped four years ago. What a waste!
On a related post, Scott Sumner reminds us that doing a “post mortem” of GDP components is not illuminating:
This report alludes to the fallacy of trying to analyze GDP by looking at sectors:
While the unseasonably warm weather helped the economy by boosting home building and renovations, it undercut demand for utilities, spending at ski resorts and sales of winter apparel.
If consumers spend more in one area they spend less in another area. What you need to do is change the total amount that consumers are spending, and only the Fed can do that. Sectors don’t matter, and government is just another sector (as long as Bernanke is determined to keep inflation at 2%.)
And Ryan Avent at Free Exchange argues that there is a big demand problem:
The internals of the first-quarter report are also a bit discouraging. Growth in personal consumption expenditures was pretty good at 2.9%, but private investment growth slowed sharply. Growth in final sales of domestic product, a good measure of underlying demand, came in at an anaemic 1.6% pace. Current-dollar GDP growth was a paltry 3.8% for a second consecutive quarter. The American economy is clearly one in need one of demand.