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American Morning
GDP Figures Are Out
Aired August 29, 2001 - 09:01 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: We are going to begin with the latest reading of the health of the U.S. Economy.
The vital signs are still a bit weak, as some economists were predicting no growth. Instead, the gross domestic product, or GDP as it's commonly known, grew at a rate of 0.2 percent in the second quarter. That is the weakest showing in eight years, although it is a positive one. Some analysts were expecting the number to be negative.
CNN's Peter Viles joins us from Washington. He's got the story behind the numbers for us this morning. Hey, Peter.
PETER VILES, CNN CORRESPONDENT: Hi, Leon. You know that expression, "everything but the kitchen sink?" GDP is everything, including the kitchen sink; whether you buy it, whether the government buys it, or whether a business buys it.
Let's take a look at this number and what makes it up. It's the biggest, broadest measure of the economy. What's in it and whether it's growing. The biggest part, I'm going to call it "you," is consumer spending: 68 percent. Consumers today can pat themselves on the back, because this is not really the problem. Consumers continue to buy cars, houses, we buy lunch - that's consumer spending, just about everything.
Where is the problem? It's over here. Let's take a look at what's over there. Government - government is 18 percent of the economy. The government continues to chug right along. There's no recession in Washington, there's no recession in state capitols or city halls. So, this is not the problem.
Where is the problem? Let me see if I can clear this. last piece, which is also 18 percent: Business investment. Businesses are simply not investing. They have gotten very pessimistic and cautious about the future. They're not buying those big plants, big factories, big computer systems that they were buying a year ago. That's why the economy has hit a real brick wall here, this is the area of weakness in our economy, not the consumer, not the government but corporate America.
The economy, as a result, has really hit a brick wall, Leon. If you take a look.
HARRIS: That's a rather appropriate choice of color there, coloring it yellow. A rather sickly looking yellow. But, let me ask you something. before you go on...
VILES: Sure.
HARRIS: ... because it just occurred to me, and I'm not that good at math...
VILES: OK.
HARRIS: ... but I'm good enough to add 18, 18 and 68. That's more than 100, that's 104. What do you mean by that?
VILES: Leon, you were paying attention.
(CROSSTALK)
VILES: You're going to get an A on this. It does add up to 104. Where's the other four, what happens to the four? We give away 4 percent of our economic activity, in the sense that we buy stuff outside the United States. It's our trade deficit. That's the stuff, when you buy a computer for Singapore, or a car from Japan, or a toy from China. That's 4 percent, that's the trade deficit.
HARRIS: So why is it that...
VILES: What happens here is...
HARRIS: Why is that a bad thing, or why is that not the big problem?
VILES: Well, it's not the big problem. It might be a bad thing, it's been going on for some time. But, that hasn't really changed. That is not the area of weakness in the economy. We've had a trade deficit for a while. You know, Americans like Japanese cars. It's not a huge problem, sometimes it get worse, sometimes it gets better.
The problem is that businesses have stopped spending money. If you take a look at economic growth, you can really see where businesses just slammed on the brakes.
If we can take a look at the GDP growth rate. We know today it's positive, but take a look here. This was 5.7. That was just a little over a year ago. That is really great growth. Some people think it's even too strong. But then we go down to 1.3, 1.9, 1.3. Today number, I'll try to make it barely positive -- there it is -- is 0.2. You connect these dots, that is not a very good pattern. It looks like it's going straight down.
This is the debate today. When does this thing turn? Does it level off, does it continue to go negative, or does it turn positive? This is a question we can't answer. We're going to try to answer. People will try to answer it on CNN today. But, I will tell you, it's like a baseball game in the 8th inning, nobody knows how this thing is going to end. Economists think they know, and we'll hear from them today.
But, we really don't know if this expansion is over or if it's going to get a new wind. Leon?
HARRIS: Interesting. Thanks, Peter. That's a great way of visualizing it for us. We appreciate that. We'll talk with you later on.
VILES: Sure.
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