GDP Grows 2% in Q3 2012, Spurred by Massive Government Spending Binge

GDP Grows 2% in Q3 2012, Spurred by Massive Government Spending Binge

The U.S. Bureau of Economic Analysis reported today their advance estimate that the U.S. economy grew at a compounded annual rate of 2% in the third quarter of 2012.

The primary driver of improved growth over Q2 (1.25%) was a massive spike in government consumption, the largest in three years and accounting for over one-third of the 2% growth estimate:

“Real federal government consumption expenditures and gross investment increased 9.6 percent in the third quarter, in contrast to a decrease of 0.2 percent in the second. National defense increased 13.0 percent, in contrast to a decrease of 0.2 percent. Nondefense increased 3.0 percent, in contrast to a decrease of 0.4 percent. Real state and local government consumption expenditures and gross investment decreased 0.1 percent, compared with a decrease of 1.0 percent.”

A few months ago, The Washington Dispatch began tracking the progress of the current recovery against the 1980s recovery.

Since the second quarter of 2009 (the last quarter of GDP contraction), real GDP growth has averaged 2.2% over the last thirteen quarters.  By comparison, in the thirteen quarters following the third quarter of 1982 (the last quarter of GDP contraction resulting from the early 1980s recession), real GDP growth averaged 5.4%, or more than double the current average:


Falling demand, rising inventory excesses, and declining labor force participation have all contributed to lackluster growth and continue to expose the U.S. economy to the risk of a “double-dip” recession.


The Washington Dispatch
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