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Good news: US GDP grew 3.5% in 3rd quarter

The series of declines in the Gross Domestic Product (GDP) of the United States over four quarters ENDED in the 3rd quarter, when the GDP grew at a 3.5% annual rate. The previous four quarters had been the most severe slide in the GDP since the Great Depression.

The GDP increased slightly more than expected. Economists surveyed by had expected the GDP to grow 3.2%. The GDP is the broadest measure of U.S. economic activity, and the increase is yet another sign that the U.S. economy has pulled out of the deep recession that began in December of 2007. The fact that business reduced inventories at a slower pace than in the past helped to raise the GDP by nearly a full percentage point. Rebounding auto sales that were aided by the government Cash for Clunkers (1, 2, 3) program also boosted the GDP. Christina Romer, chair of the White House’s Council of Economic Advisors noted that the swing from a 6.4% rate of decline in GDP during the first quarter to the 3.5% rise in GDP during the third quarter is the biggest six-month turnaround in the economy since 1980.

The cutting of production in jobs has been one of the strongest drags on the economy during the past four quarters. (IMHO, this is another example of business “shooting itself in the foot” by increasing that nagging, lagging indicator, unemployment.)

Other positive signs of economic growth included a 3.4% rise iin consumer spending, THE BIGGEST INCREASE IN NEARLY THREE YEARS. Consumer spending accounts for greater than 2/3 of the U.S. economic activity. Investments in residential real estate soared 23% in the third quarter! Other recent reports showed that housing sales, home prices, and new home construction all rose during the third quarter.

-Bill at Cheshire Cat Photo™

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