3rd qtr Savings Rate Goes Negative 1.1% as Consumption Drives Growth?

Below is my paraphrase of portions of the 3rd qtr report of the Center for Economic and Policy Research in Washington, D.C.
====================================================


The 3rd qtr GDP grew at a solid 3.8 percent annual rate, driven primarily by a 3.9 percent annual rate of consumption growth that far outstripped income growth, pushing the savings rate down to negative 1.1 percent, giving us the first quarter ever in which households were reported to have a negative savings rate. :-( Now the 1.2 percentage point drop in the savings rate from the previous quarter was driven in part by one-time losses of rental property associated with Hurricane Katrina - but, even without this effect, the savings rate still would have been negative 0.6 percent. The savings rate averaged more than 8 percent from the sixties to the eighties, and now with the current demographics should be even more into savings as the entire baby boom cohort is in its peak savings years.

Of course the good GDP growth was also via Gov defense spending which spured the economy via a 10.2 percent surge - adding 0.47 percentage points to the growth rate. And Thank God for auto sales growing at a 17.6 percent annual rate, adding 0.62 percentage points to GDP growth.

But "Investment" grew at a relatively weak 6.2 percent annual rate, while we need strong double-digit investment growth to sustain the economy once consumption goes normal - as would be expected in the 4th qtr - but this is the third consecutive quarter that investment growth has been in the single digits, and recent data on durable goods orders indicate that it may be slowing further in the near future.

So we are on an unsustainable path of negative savings, large trade deficits, and severe overbuilding in the housing sector. And the Business media says nothing, not even noting that the overall GDP price index rose by 3.1 percent.

Digging into these numbers is such an important piece of activism and it takes time.

I rely on your to go dig into the bowels of these reports to find out the truth behind the spin.