Defense Has Fueled Rise in GDP

from The Wall Street Journal,

Faster government spending, particularly on military, accounted for nearly half of acceleration in economic growth since mid-2017.

A stark pickup in government spending, particularly in defense, has helped fuel a broad acceleration in U.S. economic growth in the past year and a half, according to a Wall Street Journal analysis of Commerce Department data. The U.S. economy has expanded at a 2.9% annual rate since April of 2017, according to the Commerce Department’s tabulations of the nation’s gross domestic product, or output. That growth rate is faster than the 2.2% annual growth rate between mid-2009—when the expansion started—and April 2017. Faster government spending accounted for nearly half of the acceleration, according to The Wall Street Journal analysis. The Commerce Department breaks down various contributors to economic growth, including government spending, business investment, consumer outlays and exports. Defense shifted from contracting at a 2.1% annual rate between June 2009 and March 2017, to growing at a 2.9% rate since April 2017. The turnaround added 0.21 percentage points on average to the nation’s overall economic growth rate, according to Commerce Department figures.

When including faster spending on nondefense items and spending at the state and local levels, increased government spending accounted for 0.34 percentage point of the 0.7 percentage point increase in the growth rate since April 2017, or nearly half. Other factors are at play. Faster business investment, due in part to energy investing, has contributed 0.3 percentage point to the growth rate, while faster consumer spending accounts for about a third of the pickup. A slowdown in home building has subtracted about 0.2 percentage point from the growth rate.

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