NT Daily Commentary
As shown in Chart 2, real government expenditures rebounded with annualized growth of 5.6% in the second quarter. Real private domestic expenditures on final goods contracted at an annualized rate of 3.2% – still very weak, but not as weak as the first quarter’s annualized contraction of 7.3%.
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As shown in Chart 3, real state & local government gross investment (i.e., infrastructure spending) soared to an annualized rate of 13.3% in the second quarter while real general operating expenditures were nearly flat. With state & local fiscal situations in dire straits, where did these governments get the funding to engage in so much investment, “gross” as it might be? Most likely directly from the U.S. Treasury or indirectly from the U.S. Treasury from “Build America” bonds – taxable bonds issued by state & local governments but with a Treasury rebate to the issuers. Also, state & local government operating, or consumption, expenditures likely would have been weaker had it not been for U.S. Treasury funds transfers to these government entities
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