GDP Revised Downward, Again

Estimated GDP growth for the third quarter has been revised downward again, to 2.2% from an initial estimate of 3.5% (it was also revised downward last month).  That means that the Cash-for-Clunkers program accounts for most of the growth:

Motor vehicle output added 1.45 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change. Final sales of computers subtracted 0.08 percentage point from the third-quarter change in real GDP after subtracting 0.04 percentage point from the second-quarter change.

Since cash-for-clunkers probably moved auto purchases forward, rather than generating actual new demand for autos, this considerably dampens hopes for a "V" shaped recovery.  As Reinhart and Rogoff predicted last winter, the economy is probably going to putter along for a while before it generates new jobs and demand.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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