Economy Grows at 2.5 GDP in Third Quarter

Guest Blogger: Mike Sax

This time the consensus was right. While we had worried earlier that such optimism could be dashed, I had concluded that the trend in data lately has unquestionably been up.

For my earlier piece-that I wrote before dawn-please go here.

As it turns out GDP growth increased by exactly the 2.5 percent predicted. At the moment it seems that while we haven’t felt confident-recent consumer confidence is at its lowest level since the 2007-2009 recession-things have been getting better. Consumer spending, which accounts for 70 percent of economic activity, grew by 2.4 percent as opposed to only .7 percent in the second quarter.

Similarly, business investment picked up:

‘Similarly, while some business surveys have pointed to a contraction in factory output, there is little sign corporate America is cutting back spending. Indeed, recent data has suggested business spending is picking up. Business spending rose at a 16.3 percent pace as companies splurged on equipment and software, and invested in nonresidential structures. ”

Like consumers it seems that business spending exceeds confidence. Unemployment claims were down 2,000 to 402,000 and have clearly shown a downward bias in recent months though sustained job growth is only indicated when they are able to consistently dip beneath 375,000 a week.

“Apart from consumer and business spending, growth in the third quarter was also supported by a smaller U.S. trade deficit, and the careful management of business inventories bodes well for fourth-quarter production.”

“The GDP report also showed a moderation in inflation pressures, with the personal consumption price index (PCE) rising at a 2.4 percent rate in the third quarter, slowing from the April-June quarter’s 3.3 percent pace. Core PCE, which excludes food and energy, rose at a 2.1 percent rate after increasing 2.3 percent in the second quarter.”

[via CNBC]

Also found at Diary of a Republican Hater