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Personal income is way up, leading to an increase in both personal savings and consumption. Private sector investment is way up.
All of those gains were swamped by a huge hit to defense spending, which fell 22.2 percent. That's probably a sour mix of statistical noise, war "savings," a bit of hoarding by defense contractors ahead of the sequester-induced financial drought, and so on. But it goes to show that pulling federal spending out of the economy can eradicate growth.
That's not what you'll take away from today's report if you're within earshot of the conservative noise machine, which is treating this report much like they treated jobs reports ahead of the election. Back then, employment growth wasn't weak because of state and local government job losses, but because Obama. Now, GDP is down because the economy sensed Obama wouldn't say much about jobs during his inaugural address and preemptively contracted. Or something along those lines.
Not that anyone's asking me, but that seems like a huge missed strategic opportunity, driven perhaps by the fact that Republicans don't want to admit lower government spending (austerity) is to blame here. It's scrambling their brains. It's making them forget about the rhetorical virtues of military Keynesianism.
This is in some ways a conservative's dream GDP report. The private sector is humming along in the face of shrinking government. Now, they can't celebrate that -- it makes sense to drape the negative top line number over Obama's shoulders, and in this particular case the part of government that's shrinking is the only one the right really cares about.
But there's no election next month. What happens next month is that defense spending will begin to fall further. Republicans want to avoid that, and they particularly want to force Democrats into avoiding it by cutting other government programs instead. To my mind, that's the real opportunity the GDP report provides the GOP: spook Democrats into dealing on the sequester. But as if it were October, they reflexively want to use every modicum of bad economic news to marginally reduce Obama's approval numbers.
Maybe they'll find their way there eventually. But they're still lost in an election-season fog.