Big Chunk of GDP and Economic Growth Is Consumer Spending

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CONSUMER SPENDING! No jobs, no money to spend. The viscious circle …

Economy grinds to halt as consumers pull back

NEW YORK (CNNMoney) — Consumers all but shut their wallets in the second quarter, causing the U.S. economy to grow at a tepid pace. To make matters worse, growth in the first quarter was much slower than initially thought, according to new government figures released last week.

Gross domestic product, the broadest measure of the nation’s economic health, rose at an annual rate of 1.3% in the second quarter, the Commerce Department said. While that’s an increase from the revised 0.4% growth rate in the first three months of the year, it is hardly good news. The government originally reported that the economy grew at a 1.9% annualized rate in the first quarter.

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The BEA also released an updated spreadsheet containing the annual GDP figures since 1929 and quarterly GDP figures since 1947.
The following graph shows the change in the annual real GDP figures since 1940 – here.

The New Economy: 1990s to 2007

During the 1990s, the national debt increased by 75%, GDP rose by 69%, and the stock market as measured by the S&P 500 grew more than threefold. From 1994 to 2000 real output increased, inflation was manageable and unemployment dropped to below 5%, resulting in a soaring stock market known as the Dot-com boom. The second half of the 1990s was characterized by well-publicized Initial Public Offerings of High-tech and “dot-com” companies.

By 2000, however, it was evident a bubble in stock valuations had occurred, such that beginning in March 2000, the market would give back some 50% to 75% of the growth of the 1990s. The economy worsened in 2001 with output increasing only 0.3% and unemployment and business failures rising substantially, and triggering a recession that is often blamed on the September 11 attacks. An additional factor in the fall of the US markets and in investor confidence included numerous corporate scandals.

Through 2001 to 2007, the red-hot housing market across the United States fueled a false sense of security regarding the strength of the U.S. economy. The home mortgages was a source of increased liquidity and consumer spending leading to the collapse of the housing market and the financial crisis in 2008.

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Contributions to Percent Change in Real GDP (the US 1991-2008)