Ugly Q3 GDP Confirms Personal Consumption Collapsing; Headline "Growth" Driven By Government, Inventory Accumulation

Tyler Durden's picture

One glance at today's second read of Q3 GDP may leave some with the false impression that the US economy is soaring, because after sliding to 1.3% in Q2, and after a preliminary read of 2.0% in the first Q3 estimate, today's print, which missed estimates of a 2.8% print, did nonetheless rise to 2.7%. "A stunning success", the administration sycophants would say. Absolutely wrong. Because a quick glance at the underlying numbers shows the true picture of the economy which contracted far more than most expected, with personal consumption collapsing to 1.4% Q/Q, on hopes of a 1.9% rise, and down from 2.0%. In fact, at 0.99% personal consumption expenditures - the core driver of 70% of the US economy - were a tiny 36% of the headline number. Ironically today's second GDP revision was far worse when analyzed at the component level, than the first Q3 estimate, which while lower overall at 2.0%, at least had personal consumption nearly 50% higher at 1.42%, or well over half of the total contribution. So what drove "growth" in Q3? Nothing short of the most hollow and worst components of GDP: Government Spending, which soared to 0.67% of the annualized number, the first positive print in years, and of course, Inventories, which were responsible for 30% of the headline number. Finally, and most importantly, Fixed Investment, aka CapEx, was a meager 0.1%, or the lowest GDP contribution since Q1 2011. Without CapEx there is no corporate revenue growth (and future hiring intentions) period.

Sadly not even Sandy can be blamed on the collapse in consumption in Q3, for the simple reason that the Hurricane did not hit until 1 month into Q4. Perhaps it is Sandy's fault it did not hit sooner. In the meantime, all those hoping that the US consumer is finally waking up from his slumber and is spending (on credit of course) like a drunken sailor (for anything more than iPads using student loan proceeds), will have to wait until Q1 2013, as the Q4 2012 number will be even uglier than the one just released.

And a longer-term confirmation of the collapse of Personal Consumption courtesy of John Lohman:

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
lizzy36's picture


Follow the yellow brick road, and BTFD. Just make sure a house doesn't fall on you.

GetZeeGold's picture



The election is over.....made it by jiiiiiiiiiist that much.

EnslavethechildrenforBen's picture

made in china... sold to you by walmart...

economics9698's picture
"Real federal government consumption expenditures and gross investment increased 9.5 percent
in the third quarter"

All you need to know about this bull shit. 


edb5s's picture

No need to break it down into components.  This is bullish (for these markets).

CrashisOptimistic's picture

Remember how the October deficit number exploded past the September number?  

It did on that particular report.  On other reports, it happened earlier.

francis_sawyer's picture

Jos A Bank is offering a 'BUY ONE GET 7 FREE SALE'... I'm holding out for a better deal...

CheapBastard's picture

With an 8% inflation rate and a GDP purported to be 2%, that leave a GDP growth of -6%.

Strong contraction yet very bullish.

vast-dom's picture

unfortunately not many paying much attention to ugly and/or real as markets are ramping on phony gdp revisions.

The Axe's picture

sandy   it fucking Sandy

LawsofPhysics's picture

"Elections" over, will the "market" be moved by fundamentals?  I think not.  < sigh >

otto skorzeny's picture

GDP is the most easily manipulated and overrated # that ANY govt can use. It's something that can be used in a headline(think CNBC) to distract from underlying garbage.

kito's picture

more than the mighty dow?????.............

Water Is Wet's picture

+1, GDP is absolutely worthless.  Everyone needs to hurry out and get cancer, aids, herpes, and syphillis.  Rush to the hospital so GDP can EXPLODE!

Kayman's picture

Without GNI accompanying it, GDP is like the sound of one hand clapping.

Incubus's picture

I am convinced solipsism is true to some extent.


This is all willed of my mind.  Whenever I stop consuming, consumption stops.  Whenever I buy shit, everyone buys.'s picture

97% only read the headline I bet

LawsofPhysics's picture

"50% or so probably can't read." - fixed.

azzhatter's picture

Is the headline on my obamaphone? Keep obama in president

SheepDog-One's picture

AH! So this is why equities have a huge premarket boner. I thought 'after the elections' reality was supposed to come knockin again? Guess not....they'll phony this shit up until the next planned false flag attack gives them cover to rip it like 9-11.

ebworthen's picture

Fiscal cliff?

Government spending is the only thing keeping this economy from collapsing.

Krugman the bearded potato will say it is time for the government to spend $1Trillion more per year.

Jobs?  Who needs jobs?  Crank up the FED Ctrl+P thumb and fat finger.

Jim Cramer saying the Northeast will lead us out of our small setback, and that GDP isn't all that bad.

Down the rabbit hole!

IridiumRebel's picture

"bearded potato"


I would redo my screen name if I could with this gem. Thanks for helping me spit up my coffee. 

Taffy Lewis's picture

Spud Krugman?

It has a nice ring to it.

Orly's picture

I like it but it needs a little more oomph.  Let's add a Z..

Spudz Krugman

How do you think?

IridiumRebel's picture

ya just wanna punch him in the throat, right?

Cursive's picture

The ability to deny that we are in an economic depression is a testament to the American delusional character.  Maybe watching too many Stallone/Rambo and Schwarzenegger cartoon movies is coming home to roost.

SheepDog-One's picture

Nah all people care about is the next 'Gangnam Style' video. Why would they have to worry about real things? They be callin baby-daddy on the free ObaMao phone and get phat gubment checks, its all good.

Tsar Pointless's picture

That's racist.

How about the DSWM (Dumb Straight White Men) of this country? What are their priorities? NASCAR. Football. Hunting.

But, no - you're right. Only black people get any benefits from government. And only black people are ignorant of "real things", as you say.

SheepDog-One's picture

Pull the stick out of your ass.

Tsar Pointless's picture

I will, but only if you pull your head out of yours at the same time.

Meatballs's picture

Ya'll like numbers, right? The LARGEST group in the U.S. receiving Food Stamps are WHITE. Look for yourself.

AynRandFan's picture

Aren't there 10x more "caucasians" than blacks in the population?

blunderdog's picture

Depends on how specifically you want to define "caucasian."  According to the common 'Merkin vernacular (in which Afghans and Mexicans are NOT "caucasian"), it's probably closer to 3 to 1.

AynRandFan's picture

Maybe you ought to check the percentages of blacks that vote for and receive welfare before throwing down.

Anyway, "It's Free, Swipe Yo EBT"

astoriajoe's picture

black people? Given the reference in the first line I thought he was talking about Koreans.

otto skorzeny's picture

actually-that vid is a satire of the gaudy consumerism of the newly rich in S. Korea- though most morons here in the US don't know it.

holdbuysell's picture

So, what exactly is the government stocking up on? /sarc

otto skorzeny's picture

HP rounds for the National Weather Service?

holdbuysell's picture

Launched from a Metal Storm delivery system?

Sheezus. This is amazing:


sudzee's picture

Looks great but after 1/2 second you need to wait a week for delvery of another 100 tons of ammo.

Cortez's picture

Hiring contract employees out the wazoo.  Less benefits to be paid and they can claim that there are less government workers than 5 years ago.

T-Silver's picture

Looks like Santa might take this year off.


mdtrader's picture

Boehner is the new Santa. I reckon CNBC are trying to sign him up now lol.

azzhatter's picture

Rise Above you fools, we are all rising above