Thanks Uncle Sam!
Thanks to a big jump in government spending, the U.S. economy didn’t shrink quite as dramatically as expected. While investors breathed a sigh of relief over the relatively modest 0.3 percent decline in third-quarter GDP, a look behind the numbers shows the main pillar of the economy crumbling.
Real disposable personal income — the extra money in consumers’ pockets that keeps cash registers ringing — fell 8.7 percent, the biggest decline since quarterly records started in 1947.
Considering that consumer spending accounts for about two-thirds of U.S. economic activity, that’s a scary number. So why didn’t GDP fall off a cliff? Government spending was up 5.8 percent, the biggest jump since the second quarter of 2003, which was right after the start of the Iraq War.