GDP increase: Up 3.5 percent in third quarter, the first rise in a year
Filed under: Economy
It's good news that investors have been waiting awhile for: The U.S. economy grew for the first time in a year, rising 3.5 percent in the third quarter, the U.S. Commerce Department announced Thursday. It was the strongest growth rate in two years and was led by consumer spending, a slower reduction in inventories, a stabilizing housing market, and large increases in government spending connected to the federal stimulus package.A Bloomberg survey had predicted a Q3 GDP increase of 3.0 percent. Prior to Q3, the economy had contracted for four consecutive quarters, including a 0.7 percent decline in Q2 and a 6.4 percent decline in Q1. The U.S government revises its GDP estimates for previous quarters as it receives more information.
Over the past 12 months, the U.S. economy contracted 2.3 percent. In 2008, the world's largest economy grew a scant 1.1 percent -- well below capacity. Meanwhile, core consumer prices -- an inflation barometer closely monitored by the U.S. Federal Reserve -- increased at a 1.4 percent annual rate in Q3.
In current dollar terms, U.S. GDP rose 4.3 percent to an annual rate of $14.3 trillion.
The Q3 data revealed a broad-based return to growth. Sales increased at a 2.5 percent annual rate, consumer spending rose 2.4 percent and durable goods spending surged 22.3 percent – the latter boosted by the federal government's "cash-for-clunkers" program. Business inventories declined 2.5 percent, but that was a marked improvement over the double-digit inventory declines posted in the first half of the year. Housing investment soared 23.4 percent, and exports surged 14.7 percent, aided by the weaker dollar. Government spending was up 2.3 percent, including a 7.9 percent increase in federal government spending.
Meanwhile, the U.S. savings rate declined to 3.3 percent in Q3 from 4.9 percent in Q2. Disposable income decreased 3.4 percent, compared to a 3.8 percent rise in Q2.
Despite the better-than-expected GDP numbers, the Q3 gains do not mean the recession is over, technically. The economy is recovering, but the National Bureau of Economic Research is the widely-accepted arbiter of economic indicators, and its defines the end of a recession as two consecutive, positive GDP quarters. And even if the next quarter's numbers prove the economy has turned the corner, one devastating effect will linger: More than 7.2 million jobs were lost amid the most severe contraction since the end of World War II.
Economic Analysis: This impressive Q3 GDP report reveals a broad-based advance in commercial activity. The economy is being propelled by residential investment, government spending, consumer spending and by the reduction in inventory declines. Further, the federal fiscal stimulus package is working. A pessimist would look at the Q3 data and question this newborn expansion's durability. An optimist would argue that government spending and the stabilization in housing and business investment have enabled the economy to start crawling out of its deep hole, and might suggest that we had avoided the abyss.
What would ensure that the economic expansion lasts? The end of monthly job losses and the resumption of job growth; but given the current slack productive capacity in the economy, job gains are probably 3 to 5 months away.
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Reader Comments (Page 1 of 5)
10-29-2009 @ 10:47AM
Chris L said...
Not to throw water on this party, but what impact would subtracting out the Cash For Clunkers injection the economy got in the 3rd quarter...an injection that will reduce growth in future quarters? Job losses will continue, state and local governments will need to contract, commercial reat estate is in the dumpster and we are about to see dramatic phantom taxes hit our wallets. I don't see how the recession can be considered over with the economic meltdown still unfolding.
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10-29-2009 @ 11:21AM
Jim said...
Great comment...It's good to see that there are still people that think clearly and are able to see through all the lies that the state controlled media tell us.
10-30-2009 @ 4:07PM
James said...
Components of GDP
GDP (Y) is a sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X - M). This results in the common macroeconomics formula Y = C + I + G + (X − M). GDP includes government spending. This is the sum of government expenditures on final goods and services. It includes salaries of public servants, purchase of weapons for the military, and any investment expenditure by a government. It does not include any transfer payments, such as social security or unemployment benefits. With all the government spending going on, you cannot tell the real health of the economy, which are the other parts of the GDP: consumption (C), investment (I), and net exports, you know, the real economy.
10-29-2009 @ 10:59AM
norrin96 said...
Obama's fault. LOL.
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10-29-2009 @ 10:59AM
sgentilejr said...
Almost every major company (GE, Microsoft, Intel etc. etc) reported LOWER sales in the 3rd quarter. The US postal Service, Federal Express and United Parcel Service reported lower package volume. The railroads all reported less freight traffic on their lines. It is 100% IMPOSSIBLE for GDP to go up as our government claims it did, when every major business is reporting lower sales. Anyone gullible enough to believe this report also believes in Fairy Tales.
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10-29-2009 @ 11:34AM
Russ said...
I agree you hit the nail on the head! All of this contraction in major sections of the economy and GDP is up! Obama math! Less is more! Don't you love the media spin!
10-29-2009 @ 3:32PM
Chris said...
Good points...I figure it is the government that grew at 10% and that industry was negative, giving a 3.5% growth.
10-29-2009 @ 11:02AM
Daniel said...
They just reported over 530.000 just filed for unemployment this week and we are supposed to beleive this B/S that the economy is getting better. DOES NOT COMPUTE
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10-29-2009 @ 11:09AM
Gayle Adcock said...
This is incredible, just one day after reports that more states are hit with higher foreclosure rates, but if everybody is back to profitability I guess all the bailout money will be paid back tomorrow. I guess my bank can stop manipulating debits and deposits to generate fees. I guess that increasing unemployment figure is wrong. I guess the prediction that seasonal sales will be dismal because the consumer isn't returning to spending is just history. I don't see anybody spending. Delivery trucks used to be on my street day and night - not for months. People in my neighborhood didn't drive cars over 3 or 4 years old, now it's over 6 years old. Where do they get this stuff.
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10-29-2009 @ 11:12AM
Doug Klast said...
You folks who are worrying about Socialism infiltrating America, have nothing to worry about. All civilized countries, in the entire world, are a combination of capitalism and socialism. The US has fewer social services, to act as a safety net for our citizens, than any other country. As far as which system, in it's pure form, is the cruelist? It's a toss up.
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10-29-2009 @ 11:18AM
Ted said...
This "Jump of 3.5%" in GDP is the result of mathematical manipulation of numbers only....with the public being the intended victim of this econimic hit-and-run.
Show us the REAL numbers ... not math on steroids!
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10-29-2009 @ 11:17AM
Paul said...
I would Not count on this one. All Real indications are that 2010 and 2011 will be worse years than the last 2. Artificial Prop of the Numbers will Not prove worthy of support and will be headed for at least 40 Percent Collapse by end of this year. Earnings reports are Bogus as well as the Current Stock numbers. Banks and Corporations are reporting a Profit Only because they are Laying off Workers and Restructuring. Also, it is found that Banks that received " Bailout " Money are reporting that as Profit as well. They also do what I call " Twiddle " the numbers to make things appear better than what they are just to Lure in Unsuspecting investors
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10-29-2009 @ 11:21AM
reecegswofford said...
Integrity thy name is Judas! A sad thing when not only our President is less than truthful, but the balance of our Government can't tell it straight either! The economic condition of this country is stressed to the max. When the Gov't tells us that unemployment is 10%, you can believe that in much of the country this means closer to 20%. Get out of Iraq. Get out of Afghanistan. Brinf 300,000 troops home from Europe, the Middle East and Asia! Stop illegals. Stop the drug economy. Put the money into energy, education and health care. "If you want to sell cars in the USA, build them in the USA." Stop printing money instead of earning it. No pay increases for Congress until the country is straight. Cut expense accounts and junkets by 50%. Not one time has this President suggested freezing the growth of the Federal Gov't, which unbelievably eats 20% of our income. Trillions and trillions in debt! The interest on our debt is more than the GNP of most other countries. Reduce our military budgets by 10% a year for the next three years! NO MORE EARMARKS. Reduce taxes 5% a year for the next 5 years! ENOUGH YOU GD LYING POLITICIANS!
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10-29-2009 @ 3:25PM
Jozef said...
I fully agree with your observations, and insights. Informations in US newspaper, official internet as AOL, and most of the media are withelding accurate informations for years now.
In fact it remainds me more and more about informations in former communistic Czecho-Slovakia, where I grow up.
Many of us have eyes, but don't see, have ears, but don't hear.
European-American
10-29-2009 @ 11:32AM
patty said...
The economy must be growing for the top of the chain 'cause it's not growing down here at the bottom!
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10-29-2009 @ 11:33AM
Mark said...
The rock band Three Dog Night from the early 70's wrote a song about this....."LIAR"!!!!
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10-29-2009 @ 11:45AM
U.S. Blues said...
Is the " Suprise Factor" factored in this growth. Suprise the country is broken.Now we need to dump more debt on ther real people>>>>Health care reform. A bit like homeland security.we had fbi cia state federal and local secirity they just repackaged it charged us more and called it new and improved... Home land Security.Here is some reform don't care for illegal imagrant emergancy room walkins.Health care will be the same and the cost will go up any way they package it. These preelection promises must stop. Full speed ahead on the ship of fool.
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10-29-2009 @ 11:49AM
jerry schablein said...
Wait until the low interest rates end and inflation eats up the value of the collar even more . There needs to be increased job vreation and less money flowing out the back door to foreign countries.
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10-29-2009 @ 11:50AM
Sorry Obama said...
Wow the government dumped trillions of our dollars into the economy and now the GDP is up...amazing. On a related note, I transferred money into my checking account..and I just checked it today - what do you know...my balance went up!!! It's gonna be a rough couple of years. Good luck to all.
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10-29-2009 @ 11:51AM
DAVO said...
WARNING FAKE ECONOMY AHEAD . IT'S ALL FROM UNASTAINABLE GIVE AWAYS .
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