David Altig has some awesome charts comparing this recovery to the last two recessions. Let me talk through two of them.
Here is the first. It shows a couple of things. One GDP growth has been slightly less robust in the 2009 – present period. But lets just look at the composition.
The largest blue bar in each area is PCE – that’s consumer spending. Notice how much smaller it is than the other two recoveries. That’s not a big a shock. We knew that the consumer was hurting. I’ve posted tons of charts showing the “check mark” in retail sales.
However, really take a look at the green bar. That’s investment in the sense that most people think about it: Equipment and Software. A lot of investment is actually buildings, but that’s not what the average commentator is talking about when he or she mentions investment.
They mean computers, software, diesel locomotives, die presses, etc. The type of stuff that makes other stuff. Not the type of stuff that houses other stuff.
You can also see – since it is so pertinent to the current political debate – that government was a huge part of the post dot-com recovery, and a tiny part of the 1991 recovery, but has played no part of this recovery.
That, however, is peanuts in my mind relative to the deeply interesting boom in Equipment and Software. It’s a little surreal and its hard to know exactly what to make of it.
Not only that but combine it with this breakdown of PCE
Look at the strong growth in consumer durables in the current recession. Much stronger than any time before. Also, look at the massive weakness is service spending.
Now part of this has to do with how hard and fast durables declined during the collapse. Nonetheless it is fascinating to see that all of the spending that is going on in the economy now is on what could loosely be termed capital.
Its either equipment and software, which is capital for businesses. Or consumer durables, which is like capital for households.