Private-Sector Real GDP Grew By 3.3% Over the Last Year Through Q2, Equal to Post-1947 Average
The chart above shows annualized growth rates for: a) quarterly private-sector real GDP, calculated as real total GDP minus real government spending (which would be equal to personal consumption expenditures, gross private domestic investment, and net exports), see blue bars in chart, and b) quarterly public-sector real GDP, which is "government consumption expenditures and gross investment" (brown bars), from 2000 to 2012.
Based on the data released today by the BEA, private-sector real GDP increased by 2.31% in the second quarter this year (at an annual rate), following growth of 3.1% in Q1 2012, 5.5% in Q4 2011 and 2.3% in Q3 2011. Over the last year, private-sector real GDP increased by 3.3%, following 3.1% in the previous year, and both of those growth rates are close to the average growth rate over the last 65 years of 3.26% since 1947 (see updated chart).
Public-sector real GDP declined by -0.89% in the second quarter of 2012, and by -2.3% over the last year. Here's how the 2.3% annual decline in public-sector GDP breaks down: Defense spending fell by 4%, non-defense federal spending declined by 2% and state and local spending decreased by 1.6%. The -2.3% annual decrease in Q2 public-sector GDP is the seventh consecutive quarter of a year-over-year contraction in public-sector GDP, which hasn't happened since the early 1970s.
As I concluded a month ago following the first estimate of second quarter GDP in a post that generated almost 200 comments:
Maybe it's true that the "private sector is doing fine" and most of the sub-par economic growth measured by real GDP is simply reflecting the decreases in government spending at the federal, state and local levels, and not weakness in the private sector? In that case, maybe the sub-par recovery has some positive effects of shrinking government? And why don't more economists, analysts, and reporters calculate and report private- and public-sector economic growth separately?
Another question: Given the data above, shouldn't more people be happy that the private-sector GDP has been expanding at the historical average rate over the last several years, while at the same time the public-sector GDP has experienced the longest period of contraction in 40 years?