GDP data indicate a return to the bad old days
Strong headline GDP figures are in contrast to expenditure detail that show key categories flagging. This goes beyond weaker business investment, which has been widely reported. The chart shows contributions to quarterly GDP growth by all of the main expenditure categories.
Contributions to GDP quarterly growth, percentage points
In both the second and third quarters of 2014 household consumption (blue) and inventories (yellow) are making hefty positive contributions. Exports (pink) drag in both quarters, having shown quarterly declines of -0.4 per cent in each quarter of 2014. Imports are a major drag on the current quarter (darker pink), as are both private sector categories of investment: business investment (maroon, which fell for the first time in six quarters) and housing investment (purple). Instead (and paradoxically) demand is supported by government consumption (light green) and government investment (vivid green).
Looking ahead, it seems unlikely that we can rely on government demand, to put it mildly. The danger is a return to the old norm of reliance on household consumption (blue) met primarily by imports (dark pink) and financed with debt.