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Still increasing 3.5 when everyone expected 3.2 is pretty good.The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes.
Economy grew 3.5 percent in third quarter
Thursday, October 29th, 2009 -- 7:42 am
By The Associated Press
The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes.
The Commerce Department's report Thursday delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.
Many analysts expect the pace of the budding recovery to be plodding due to rising unemployment and continuing difficulties by both consumers and businesses to secure loans.
Still, the much-awaited turnaround ended the streak of four straight quarters of contracting economic activity, the first time that's happened on records dating to 1947.
It also marked the first increase since the spring of 2008, when the economy experienced a short-lived uptick in growth.
The third-quarter's performance — the strongest since right before the country fell into recession in December 2007 — was slightly better than the 3.3 percent growth rate economists expected.
Armed with cash from government support programs, consumers led the rebound in the third quarter, snapping up cars and homes.
Consumer spending on big-ticket manufactured goods soared at an annualized rate of 22.3 percent in the third quarter, the most since the end of 2001. The jump largely reflected car purchases spurred by the government's Cash for Clunkers program that offered a rebate of up to $4,500 to buy new cars and trade in old gas guzzlers.
The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualized pace of 23.4 percent, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive.
The government's $8,000 tax credit for first-time home buyers supported the housing rebound. Congress is considering extending the credit, which expires on Nov. 30.
The collapse of the housing market led the country into the recession. Rotten mortgage securities spiraled into a banking crisis. Home foreclosures surged. The sector's return to good health is a crucial ingredient to a sustained economic recovery.
Brisk spending by the federal government, led by efforts to stimulate the economy and on defense, also played into the third-quarter turnaround. Federal government spending rose at a rate of 7.9 percent in the third quarter, on top of a 11.4 percent growth rate in the second quarter.
In other encouraging developments, businesses boosted spending on equipment and software at a 1.1 percent pace in the third quarter, the first increase in nearly two years.
Third-quarter activity also was helped by increased sales of U.S.-made goods to customers overseas, as economies in Asia, Europe and elsewhere improved. The cheaper dollar is aiding U.S. exporters, making their goods less expensive to foreign buyers. Exports of U.S. goods soared at an annualized rate of 21.4 percent in the third quarter, the most since the final quarter of 1996.
Businesses, meanwhile, reduced their stockpiles of goods less in the third quarter, after slashing them at a record pace in the second quarter. With inventories at rock-bottom levels, even the smallest increase in demand probably will led to factories boosting production. This restocking of depleted inventories is expected to help sustain the recovery in the coming months.
Even with the third-quarter improvement, the economy isn't out of the woods yet.
Federal Reserve Chairman Ben Bernanke and members of President Barack Obama's economics team have warned that the nascent recovery won't be robust enough to prevent the unemployment rate — now at a 26-year high of 9.8 percent — from rising into next year.
Economists say the jobless rate probably nudged up to 9.9 percent in October and will go as high as 10.5 percent around the middle of next year before declining gradually. The government is scheduled to release the October jobless rate report next week.
Rising unemployment and continuing difficulties by both consumers and businesses to secure loans are among the forces likely to weigh on the recovery.
With joblessness growing and wages dipping slightly in the third quarter, consumers are expected to turn more restrained in the months ahead. That would put a much heavier burden on America's businesses to keep the recovery going.
Still increasing 3.5 when everyone expected 3.2 is pretty good.The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes.
White House cautious on new economic figures
LINK
It might not feel like it to most voters, but the U.S. economy is growing again after a more than a year of contraction.
The nation’s gross domestic product grew at a seasonally adjusted rate of 3.5 percent for July through September – the first growth since the spring of 2008, the Commerce Department said Thursday.
That marks a sort of unofficial end to the recession that has bedeviled President Barack Obama since he took office. Economists credited the growth to consumer spending – up 3.4 percent – fueled in part by government stimulus, such as the popular Cash-for-Clunkers car-buying program.
But Obama economic adviser Christina Romer stopped well short of declaring victory. “The U.S. economy is moving in the right direction. However, this welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered,” Romer said in a statement.
That’s because more than 15 million Americans remain out of work, and a jobs report is due next week that’s likely to show the nation’s unemployment rate continues to creep upward toward 10 percent.
That means the White House and politicians on the Hill will be very careful about declaring the recession over, even if the economy has finally started growing again.
The Obama administration said its analysis found that the $787 billion stimulus program contributed between 3 and 4 percent points to the GDP growth – meaning the nation’s output would have risen little, if at all, in the past quarter without it.
On the Hill, House Republican Leader John Boehner took the GDP news as an opportunity to take a swipe at the Obama administration. “Any positive signs for our economy are welcome, but a jobless recovery is not what the American people were promised,” Boehner said. “President Obama and his economic team said the trillion-dollar ‘stimulus’ would create jobs immediately and keep the unemployment rate below eight percent. Since then, roughly three million jobs have been lost and unemployment has risen to near 10 percent.”
In advance of the new data, White House press secretary Robert Gibbs told reporters at the White House, “we still have, in the President's mind, much work to do to ensure an environment that is helping to create jobs.”
On Friday morning, the White House will release the first comprehensive accounting of the total numbers of jobs created by the $787 billion stimulus act.
GDP is a deeply flawed economic indicator. It doesn't care where the money comes from, what liabilities you incurred to get it, or what its spent on, just as long as its spent.
Yep.
I just wish people would retain some perspective and remember then sense of panic felt this time last year and in the subsequent six or so months. We weren't talking about avoiding a minor recession, we were talking about the second great depression.
Now, I know there still needs to be jobs created, financial sector reform, and we have debt concerns but just think about where we are and about where we thought we'd be.
Unfortunately, reflation means reflating asset bubbles. When the inevitable correction comes, it won't be pretty.
Be more specific.
I'm definitely not touting the free market as much as I used to if much at all these days. This article shows how irrational and short sighted people are. I'm not sure what the US can do about that though. I know he says a large cause is because of easy money but I know he's not advocating we raise interest rates now is he?
"reflating asset bubbles"
Investment banks are gearing up for the "insurance policy bubble", where they buy $500K insurance policy for $200K, then mark it up with their fee, and sells it on to some investor, who waits for the policy holder to die to realize his gain.
Well you should be touting the free market or a free and fair market to be more precise. What we have now is a corrupt market not a free market.
You should watch the frontline episode called "The Warning" about Brooksley Born and what happened to her.
Here's the link, it's worth the time imo...
http://www.pbs.org/wgbh/pages/frontl...tm_source=grid
Bull . We would have bottomed out and recovered anyway, and I am all but certain, a better recovery with better job recovery if congress hadn't spent so much money.
dumbness.
Well, it's better than zero.
You're certain yes, but there's no way of proving it, is there? And since the majority of the 'fuel' for the economy seemed to be purchases of cars and houses, then it could be said that was an effective 'jumpstart' for our economy.
You can disagree whether it was necessary, or correct to do, but it does seem to have proven effective.
Yes, but the crash would have been severe. There's no knowing how severe really.
Beware of any sentence that follows these words.
You could be right, but we'll never find out. Allowing a chaotic deflationary crash is a political loser, especially knowing beforehand that in principle it's avoidable.
We can't dial it back to 1921, but the way Harding dealt with the post WWI crash -- lowering taxes, reducing spending, and "wage flexibility" -- might have worked this time, but the political price to be paid for pauperizing tens of millions of spoiled rotten Americans, even for "just a few years", would have been prohibitively high, and the likely reaction could be dangerous to public order.
Americans don't have the sand our grandparents and great grandparents had. But maybe our children will. It's a tough old world we're leaving to them. A falling tide lowers all boats.
We disagree on the severity. I say the lack of natural recovery and worries about the future made it worse. You think otherwise.
I know, there is not way to see an alternate future.
Japan's "lost decade" might be a good indicator, from the small amount I've read.
Only if they had all the same causes and economy type. That is not the case.
Pfft. Remember, WC said the recession was caused by Democrats' saying there were problems with the economy.
He made a graph.
Let's be realistic WC. Will a depression ever have ALL the same causes and economy type? Highly doubtful. There may, however, be similar cir stances. Let's go to wikipedia to look at the cir stances.
http://en.wikipedia.org/wiki/Lost_Decade_(Japan)
The strong economic growth of the 1980s ended abruptly at the start of the 1990s. In the late 1980s, abnormalities within the Japanese economic system had fueled a massive wave of speculation by Japanese companies, banks and securities companies. A combination of exceptionally high land values and exceptionally low interest rates briefly led to a position in which credit was both easily available and extremely cheap. This led to massive borrowing, the proceeds of which were invested mostly in domestic and foreign stocks and securities.Sounds rather similar to the US situation.Recognizing that this bubble was unsustainable, the Finance Ministry sharply raised interest rates in late 1989. This abruptly terminated the bubble, leading to a massive crash in the stock market. It also led to a debt crisis; a large proportion of the debts that had been run up turned bad, which in turn led to a crisis in the banking sector, with many banks being bailed out by the government.
We didn't have a massive interest rate cause ours, and it was only investors at risk, and stupid people who borrowed too much. We bailed out the rich. The banks who did have proper lending practices had no problems, and rather than spend hundreds of billions, we could have backed the banks for loans who did have proper practices.
Too big to fail my ass. Let them fail.
Only investors and stupid people? Obviously it was alot more than that, because the taxpayer bailed them out.
Again WC, the causes may not be EXACTLY the same, but they're quite similar.
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