GDP at plus 3.5%, cash for clunkers and home buyers big factor

Business Insider claims the GDP figure released earlier today is warped by the huge spike in auto sales in August. The report from the Bureau of Economic Analysis’ own report say 1.66 percent of the 3.5 percent growth was specifically due to Cash for Clunkers.

From the Bureau of Economic Analysis (BEA), with my emphasis added.

Motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change.

From Business Insider…

Next quarter, we won’t just be returning to business as usual for auto output. Don’t forget that Cash for Clunkers pulled future auto demand, ie. some of Q4 demand, into Q3. Thus Q4 is likely to be very weak since many people who planned to buy a car in Q4 probably took advantage of Clunkers and bought in Q3.

To put this into GDP terms, according to the BEA the spike you see below added 1.66% to the U.S. GDP growth figure reported. Thus without it, GDP growth would have been only 1.89% (3.5% – 1.66%) in Q3.

The Bureau also looks at other sectors to see how they are doing. Along with Cash for Clunkers …

Durable goods increased 22.3 percent, in contrast to a decrease of 5.6 percent. The third-quarter increase largely reflected motor vehicle purchases under the Consumer Assistance to Recycle and Save Act of 2009 (popularly called, “Cash for Clunkers” Program).

The other sector that jumped was real estate. They don’t call out the first time home buyer credit of $8,000, but it’s got to be a big factor.

Real residential fixed investment increased 23.4 percent, in contrast to a decrease of 23.3 percent.

No offense to our friend Ed Morrissey over at Hot Air, but we think he missed this part of the analysis in his post today.