Catatonic
10-29-2009, 09:40 AM
The US economy grew for the first time in a year as an aggressive array of stimulus measures brought an end to the longest period of contraction since the Great Depression.
US gross domestic product grew at an annualised rate of 3.5 per cent in the third quarter after shrinking in each of the past four quarters, commerce department figures showed on Thursday. Wall Street analysts had forecast that the economy would grow by 3.2 per cent.
Boosting growth was an upturn in consumer spending, residential investment and strong government spending. The impact of government stimulus measures succeeded in jolting the economy during the latest quarter, as the soon-to-expire first-time home buyer tax credit and the ?cash for clunkers? car rebate programme lifted residential investment and chipped away at car inventories.
?The expansion in GDP in the third quarter is further confirmation that the recession ended in the second quarter,? said John Ryding and Conrad DeQuadros, economists at RDQ Economics.
According to the White House?s Council of Economic Advisers, the stimulus added more than 2 per cent to real GDP growth in the third quarter.
?This is obviously welcome news and an affirmation that this recession is abating and the steps we?ve taken have made a difference,? Barack Obama, US president, said. ?But I also know that we have a long way to go to fully restore our economy, and recover from what has been the longest and deepest downturn since the Great Depression.?
Consumer spending, which accounts for about 70 per cent of economic activity, rose by 3.4 per cent after rising by only 0.9 per cent in the second quarter, while the surge in car demand lifted durable goods purchases by 22.3 per cent. Personal consumption expenditures added 2.36 percentage points to GDP growth.
?These numbers are heavily supported by the policy measures that were put in place,? Christian Menegatti, head of global economic research at Roubini Global Economics, said ahead of the report. ?These types of take-it-or-leave-it incentives are very effective in the short term.?
Federal spending climbed by 7.9 per cent in the third quarter, compared with a rise of 11.4 per cent in the prior three months, led by an increase in non-defence spending. This added 0.62 percentage points to the growth in output.
Businesses slowed their liquidation of inventories during the past three months, adding nearly a percentage point to the gain in economic growth. Private companies slimmed their stocks by $130.8bn, down from $160.2bn in the second quarter.
Blunting growth was international trade, with the increase in imports outpacing that in exports.
Many analysts say the rate of growth will slow after the third-quarter jump, as the initial effect of the stimulus wanes. In its latest Beige Book survey, the Federal Reserve said that most parts of the US are seeing stabilisation or growth, but that the rebound has remained weak. The Fed pointed to renewed strength in residential real estate and manufacturing but expressed concern about commercial property.
Economists at Goldman Sachs argue that the recovery will be ?sluggish? with inflation and interest rates remaining low. They warn that headwinds abound with small companies underperforming, the labour market stretched, state and local budgets cutting back and a persistent excess of housing supply.
In spite of the third quarter turnround, recent data have been mixed. Although industrial production and durable goods orders showed encouraging signs of strength recently, new home sales and consumer confidence failed to meet expectations.
Analysts suggest that unemployment, which tends to lag behind during an economic recovery, will continue to be a drag on future growth. The Obama administration is currently debating the merits of a jobs tax credit to help pull back the unemployment rate, which is expected to peak at 10.3 per cent early next year.
Separately on Thursday, labour department figures showed that fewer Americans made new claims for jobless benefits last week. Initial unemployment claims fell by 1,000 to 530,000, while those continuing to claim benefits fell by 148,000 to 5.95m.
http://www.ft.com/cms/s/0/16073bb0-c47f-11de-912e-00144feab49a.html?nclick_check=1
Who's ready to celebrate?
US gross domestic product grew at an annualised rate of 3.5 per cent in the third quarter after shrinking in each of the past four quarters, commerce department figures showed on Thursday. Wall Street analysts had forecast that the economy would grow by 3.2 per cent.
Boosting growth was an upturn in consumer spending, residential investment and strong government spending. The impact of government stimulus measures succeeded in jolting the economy during the latest quarter, as the soon-to-expire first-time home buyer tax credit and the ?cash for clunkers? car rebate programme lifted residential investment and chipped away at car inventories.
?The expansion in GDP in the third quarter is further confirmation that the recession ended in the second quarter,? said John Ryding and Conrad DeQuadros, economists at RDQ Economics.
According to the White House?s Council of Economic Advisers, the stimulus added more than 2 per cent to real GDP growth in the third quarter.
?This is obviously welcome news and an affirmation that this recession is abating and the steps we?ve taken have made a difference,? Barack Obama, US president, said. ?But I also know that we have a long way to go to fully restore our economy, and recover from what has been the longest and deepest downturn since the Great Depression.?
Consumer spending, which accounts for about 70 per cent of economic activity, rose by 3.4 per cent after rising by only 0.9 per cent in the second quarter, while the surge in car demand lifted durable goods purchases by 22.3 per cent. Personal consumption expenditures added 2.36 percentage points to GDP growth.
?These numbers are heavily supported by the policy measures that were put in place,? Christian Menegatti, head of global economic research at Roubini Global Economics, said ahead of the report. ?These types of take-it-or-leave-it incentives are very effective in the short term.?
Federal spending climbed by 7.9 per cent in the third quarter, compared with a rise of 11.4 per cent in the prior three months, led by an increase in non-defence spending. This added 0.62 percentage points to the growth in output.
Businesses slowed their liquidation of inventories during the past three months, adding nearly a percentage point to the gain in economic growth. Private companies slimmed their stocks by $130.8bn, down from $160.2bn in the second quarter.
Blunting growth was international trade, with the increase in imports outpacing that in exports.
Many analysts say the rate of growth will slow after the third-quarter jump, as the initial effect of the stimulus wanes. In its latest Beige Book survey, the Federal Reserve said that most parts of the US are seeing stabilisation or growth, but that the rebound has remained weak. The Fed pointed to renewed strength in residential real estate and manufacturing but expressed concern about commercial property.
Economists at Goldman Sachs argue that the recovery will be ?sluggish? with inflation and interest rates remaining low. They warn that headwinds abound with small companies underperforming, the labour market stretched, state and local budgets cutting back and a persistent excess of housing supply.
In spite of the third quarter turnround, recent data have been mixed. Although industrial production and durable goods orders showed encouraging signs of strength recently, new home sales and consumer confidence failed to meet expectations.
Analysts suggest that unemployment, which tends to lag behind during an economic recovery, will continue to be a drag on future growth. The Obama administration is currently debating the merits of a jobs tax credit to help pull back the unemployment rate, which is expected to peak at 10.3 per cent early next year.
Separately on Thursday, labour department figures showed that fewer Americans made new claims for jobless benefits last week. Initial unemployment claims fell by 1,000 to 530,000, while those continuing to claim benefits fell by 148,000 to 5.95m.
http://www.ft.com/cms/s/0/16073bb0-c47f-11de-912e-00144feab49a.html?nclick_check=1
Who's ready to celebrate?