GDP Shocker

The GDP numbers were really impressive this morning. The preliminary estimate of overall level of GDP growth during the period July-September was 7.2%, which is the fastest rate of GDP growth since 1984.

It’s worth checking out the original report for some details. What caused such rapid GDP growth? Surprisingly, it was pretty broad based. Here’s the breakdown:

Change due to:

– Increased consumer spending: +4.66%

– Increased housing construction: +0.92%

– Increased business spending: +1.12%

– Decreased inventories: – 0.67%

– Increased net exports: +0.84%

– Increased government spending: +0.27%

TOTAL: +7.2%

A lot of this GDP growth seems to be due to the tax cut, since the biggest increase by far was due to higher purchases by consumers. But business spending was also growing robustly, so some of it is probably also due to improved business expectations. The big question is whether consumers and businesses will keep spending at these extremely high rates for more than a quarter or two…

I would definitely not want to be in the bond market today.