Economic Alarms
My column in today's National Post carries an unfortunately overstated headline, "America's Private-Sector Era is Over." Not exactly!
Here's the key point:
The U. S. private economy continued its horrifying downward trajectory in the second quarter of the year. Private investment in everything except housing dropped 9.6%. Private investment in non-residential real estate slumped 17.3%. Investment in housing -- ground zero of the U. S. economic disaster -- collapsed by 23.3%.
Personal consumption, which had continued to grow very feebly even in the awful first quarter, contracted in the second.
Altogether, we owe the improved news in the second quarter to two sectors: government spending and cars. And the car number is just government spending by a different name. The federal government gave away $3 billion in subsidies to encourage consumers to trade old fuel-inefficient cars for newer models. The 700,000 new cars sold under the program added 0.19% to second quarter GNP growth. Nice!
But the program ended in August, and so did the sales. New car sales tumbled 22.7% in September.
The American private economy remains deeply distressed. The private economy got worse in the second quarter, not better. If car sales are any indication, this third quarter promises no better.
Read the full column here.