2009 Q2 US GDP

I've been looking at some of the Q2 numbers for US GDP and I was probably expecting somewhere along the lines of -1.0 GDP.

Federal expenditures are compensating for the drop in fixed investment. More so than is needed, helping to give the GDP numbers a boost. I find that state spending has rebounded rather strongly, surprisingly.

The good news is that the free fall in the fixed investment area seems to have stopped. But we still have weak CRE spending at -15% as anticipated.

Equipment will probably not drive a recovery unless something happens like companies get more credit. Credit spreads are quite narrow but still doesn't mean much if banks won't loan money out.

Overall Fixed investment looks like it will continue to put downward pressure on GDP. The key now will be to watch out for residential construction spending. I feel nonresidential equipment spending will increase while structure spending will decrease, having a net result of zero. The subcategories will cancel each other out. So, now we will need to have residential construction spending go down to zero for Fixed investment to have a neutral effect on GDP. I don't foresee this happening for at least six months as there is too much inventory on the market still.

It looks like we could have positive GDP next quarter as the expenditures from the government and the recent cash for clunkers probably boosted consumption a good amount. If consumption is positive, GDP will probably be positive.