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.
Bloomberg is quick to point out the bad with the good:
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.
What gets us out of any recession? You write as if you are a supply sider. More investment and the economy will rebound. I tend to think demand is more important right now. Levels of private debt were at record levels. We need to rebuild demand, work through housing inventory. Ultimately, I think government really is just a temporizing effect until the economy fixes itself. Look at GDP charts as far back as we have them. Republican, Democrat, liberal, conservative, blah, I think other factors are more important for the economy. That is why I think you should vote for national leaders based more on foreign policy than domestic. YMMV.
Caveat: We do need to make our markets work better again. The credit economy and over leveraging was harmful.
Two observations. First, we’re doing the same things as the Japanese did and their economic downturn lasted 10 years (arguably, it’s still going on). Second, you’re talking as though what we’re seeing now is a cyclic downturn. I don’t think it is.
That poor Ducth Boy is going to get eyes wide as saucers when he sees the wave coming.
I’m practicing my Japanese…………
Good question, and if someone knows the answer with certainty they’d likely be up for a Nobel. What likely happens is that the prices for some “unemployed” resources fall, and after a certain point entrepenuers come in and start exploiting these resources. Also, there might be a turning point in consumer behavior. The initial reaction is, cut back on spending, increase savings. Then for those consumers who don’t find themselves unemployed and after they’ve built up some savings and reduced some of their consumption they start to increasing consumption.
What ever on Earth gave you that idea? Dave hasn’t written anything like what I’d expect from a supply sider.
I agree. We are propping up banks that probably shouldn’t be propped up. You can argue that letting them simply fail would be bad, but then taking them over and selling off their assets to banks that are not in such bad shape and dealing with the truly toxic assets would seem to be the best approach.
Also, stimulus and gimmicky plans were tried by the Japanese as well. They build roads, bridges and so forth even where they weren’t needed, and what did it get them? Not much save a huge national debt.
Now we are on the road to a huge national debt as well AND we want to enact an energy bill that will likely harm economic growth and pass health care that will add vastly more to the national debt.
How is this in anyway a good thing?
“What likely happens is that the prices for some “unemployed” resources fall, and after a certain point entrepenuers come in and start exploiting these resources. Also, there might be a turning point in consumer behavior. The initial reaction is, cut back on spending, increase savings. Then for those consumers who don’t find themselves unemployed and after they’ve built up some savings and reduced some of their consumption they start to increasing consumption.”
Pent up demand meets lower prices and probably some increase in productivity plus new products.
I rarely see Dave mention demand, mostly investments. I ay have missed some stuff and concede I do not remember his stating it outright.
“but then taking them over and selling off their assets to banks that are not in such bad shape and dealing with the truly toxic assets would seem to be the best approach.”
I liked that approach a bit better, even if it had some risks with the government deciding what to sell and to whom. Was this plan politically feasible? Did we know how to do this? To my knowledge, no one has ever had to wind down a mega, international bank. What would that have done to lending while we were breaking them up? How many banks do you think this would have involved? I think that when you get down to particulars, it looks like a Herculean task. What would you have done with the non-banks like AIG?
Fair point about Japan. Maybe Obama should just embrace his inner socialist and take over the bad banks as you suggest. One difference I think I see, but cannot find the data again, is I think Japan had its money more concentrated into fewer banks. We have many more small banks and credit unions. Been a while since I looked at the japan stagnation, so may be wrong.
Sure. Government Motors, AIG? And was it Bear Sterns that went through a government overseen liquidation process? So yeah, the government got heavily involved and for all intents and purposes took those entities over.
That was patchy for example, at the same time they let Lehman fail. They were all over the place saying the gov’t was going to take the toxic assets, no…recapitalize, here…we’ll give you money instead. Its like they are playing pin the tail on the donkey.
How is uncertainty and often daft government policy better than sound policy. Oh, wait lets look at where these people used to work and likely will again: Wall Street. Hmmmm.
Incest is best.