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Kimberly Amadeo

GDP Growth Revised Down Thanks to Lean Inventories

By November 22, 2011

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The BEA revised its second estimate for third quarter (July-September) GDP growth lower, to a flat 2%. (Its advance estimate was 2.4%.) The revision was based on a better count of business inventories, which were leaner than originally projected. That means companies have not bought as much to stock their shelves. The silver lining to this news means that, if demand increases, then Gross Domestic Product will rebound even higher as businesses order more to replenish lean inventories.

What areas of the economy are growing? Consumer spending, including health care and housing, and business spending on equipment and software. In fact, this year's holiday spending should beat both Black Friday 2010 and Cyber Monday 2010. Thas well as recent durable goods reports.

Other than lean business inventory, what's dragging down the economy? Oh, a whole slew of things:

  • Reduced state and local government spending.
  • Cutback in non-defense Federal spending.
  • Families eating out less, and spending less on clothing.
  • Fewer trips to the gas pump (thanks to higher prices).

What It Means to You

Economic growth will continue to remain sluggish, between 2-3%, for a while. Two parts of the economy are doing the best they can -- consumers and businesses. However, two other parts are dragging down the rest -- government and housing. Unfortunately, the first decade of this century saw a bubble in government spending and housing. We are now paying the price.

What should you do? Like any smart business, there's only two things you can do -- increase revenue and cut costs. Look for opportunity in the areas of the economy that are growing -- and take advantage of holiday sales on forecasts for Black Friday and Cyber Monday.

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Comments

November 24, 2011 at 10:35 am
(1) Tigara electronica says:

Hopefully December will bring more sales and thus we come back…

March 8, 2012 at 9:38 am
(2) tigara elctronica says:

Hope for the best prepare for the worst.

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