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The headline numbers for Q2 GDP (from Q1 to Q2) growth of 3.1% look pretty good on the surface, but the details reveal something more. Perhaps Scott and Brian can comment further on this, but our work shows that by breaking down the number, you can come up with a much different conclusion.

The total dollar growth in GDP as stated by the government was $75 billion. $40 billion or 53% of that growth came from increased government spending, primarily from defense. $35 billion or 47% came from the private sector. The growth in computer spending credited by the government was $38 billion; without computer spending the rest of the private sector shrunk.

A closer look at this computer number is rather startling. Because of the high level of GDP contribution coming from the service sector, the government applies a productivity factor to the actual dollar amount of spending. I have talked about this before. Because computers are more efficient this year than last, hedonics says that the actual dollar amount of growth should be grossed up to reflect the fact that computers are faster (no other country that I know of calculates their numbers like this; they use nominal numbers). This is not money that goes to profits or that can be saved or spent. It is an imaginary number.

The actual spending in nominal dollars from computers was $6 billion. You do the math.
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