However, I always scroll down to see what has happened to total cash expenditures. My preferred measure is Final Sales of Domestic Product. The value of the first quarter 2010 was $14,568 billion. The annual rate of increase was 2.51 percent.
The good news is that cash expenditures have nearly returned to their peak value before the recession of $14,583 billion in the 3rd quarter of 2008. The shortfall is less than .1 percent.
On the other hand, if cash expenditures had continued on its 5 percent trend growth path of the Great Moderation, it would now be $16,311 billion. The current level is 11.3 percent below trend.
Even with a modified growth path of 3 percent, changing at the peak in the third quarter of 2008, the target level would be $15,723 billion, and so the current value is 7.63 percent too low.
Worse, a 2.5 percent growth rate will never return to a higher 3 percent growth path, much less a 5 percent one. Surely, it is better for cash expenditures to rise rather than fall, but the current growth rate remains too low.
I believe that the Fed should commit to returning Final Sales of Domestic Product to the 3 percent modified growth path next year. It is now the second quarter of 2010, and so, one year from now, in the second quarter of 2011, cash expenditures should be $16,324 billion. That would be an increase of 12 percent from last quarter, or averaging a 9.6 percent annual growth rate for the current and next 3 quarters.