The decrease in real GDP in the third quarter primarily reflected negative contributions from personal consumption expenditures (PCE), residential fixed investment, and equipment and software that were largely offset by positive contributions from federal government spending, exports, private inventory investment, nonresidential structures, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.
In short, consumption and investment fell but the blow to aggregate demand was tempered by increases in government purchases and net exports.
Douglas Holtz-Eakin took the liberty of issuing this BS:
Today's announcement that third quarter GDP fell at a 0.3 percent rate confirms what Americans already knew: the economy is shrinking. Barack Obama would accelerate this dangerous course. According to the independent Center for Data Analysis, Barack Obama's new policies will destroy nearly 6 million jobs over the next decade. Barack Obama's ideologically-driven plans to redistribute income will impose higher taxes on families, small businesses, and investors; expensive, rigid, job-killing health mandates on employers; energy policies that fail to promote domestic oil, natural gas, and coal, and will impose a massive Washington-driven regulation of everything from home furnaces to factories; isolationist trade policies that endanger one out of every five jobs; and massive new spending plans that that will burden the economy and saddle our children with debt. Barack Obama is change Americans cannot afford.
Shifting the tax burden away from the middle class and working poor and towards high income individuals may actually reverse some of the decline in consumption. As far as trade policies – McCain wants a stronger dollar which will reduce net exports. Holtz-Eakin also repeats McCain’s assertion that he would lower government spending. The notion that reducing government spending is a cure for a recession must have Lord Keynes rolling over in his grave.