The Bureau of Economic Analysis of the United States Department of Commerce has announced that the gross domestic product from the second to the third quarter of 2009 grew at an annualized rate of 3.5%:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 3.5 percent in the third quarter of 2009, (that is, from the second quarter to the third quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 0.7 percent.
The Bureau emphasized that the third-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 5). The “second” estimate for the third quarter, based on more complete data, will be released on November 24, 2009.
The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, private inventory investment, federal government spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
Here’s the html version of the news release.
Automobiles and residences saw increased sales; computers saw lower sales. Exports and imports both increased with imports growing faster than exports. Much of the growth can be attributed to the Cash for Clunkers automobile incentive and the first-time home buyer’s programs of the federal government.
Growth was generally broad-based, with solid gains in consumer spending, exports and home construction. But it was also driven by government programs like the popular “cash for clunkers” incentive for new auto purchases and an $8,000 tax credit for first-time home buyers.
The auto discount program ended in August and the home tax credit is due to expire next month, although Congress is working on a plan to extend it.
Stripping out auto output, the economy would have expanded at only a 1.9 percent rate in the third quarter.
A report from the Labor Department showed 530,000 workers filed claims for jobless benefits last week, more than anticipated and signaling the job market is slow to heal even as growth picks up.
The economy was forecast to grow at a 3.2 percent annual pace, according to the median estimate of 79 economists surveyed by Bloomberg News. Estimates ranged from gains of 2 percent to 4.8 percent.
The economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades. The four consecutive decreases through the second quarter marks the longest stretch of declines since quarterly records began in 1947.
Any increase is better than the decreases we saw earlier in the year but I think that announcing that the Great Recession has ended is either premature or true only in a narrow technical sense.
What we’ve seen so far are gimmicks. Using borrowed money the federal government is able to produce temporary up-ticks in narrow segments of the economy. That’s a good strategy politically and an effective one economically if what we’ve seen over the last year or so is a cyclical downturn. If what we’ve seen is a cyclic downturn the measures can provide economic support until things get back to normal. The equivalent of the brave little Dutch boy sticking his thumb in the dike. But it’s a temporary solution which will inevitably fail unless help arrives.
However, if, as I believe, it’s not merely a cyclical downturn but a systemic one or what Arnold Kling is calling a recalculation, gimmicks like Cash for Clunkers or the first-time home buyer’s incentive which temporarily shore up industries which don’t have a lot of near term (or possibly even any) growth potential, are only temporary fixes in a declining or stagnant economy.
The massive bank bailouts have not produced a solid financial system. Lending is decreasing not increasing. If there are measures that will return the financial system to health they remain in the future.
I don’t believe that anybody who is well-informed, honest, and sane genuinely believes that the whopping stimulus package passed at the beginning of the year, the various quick-fixes that have been put in place, the energy bill which may or may not pass the Congress, or healthcare reform which also may or may not pass the Congress, will put the U. S. economy back on the path to robust growth. The first two are just temporary measures, the third will probably reduce economic growth a bit, and the fourth is so indefinite now it’s hard to predict what its effects will be. Is anybody suggesting that healthcare reform will produce economic growth? I find that far-fetched.
Right now his thumb is in the dike but the brave little Dutch boy is still waiting for help to arrive.