CNN REPORTS: The U.S. economy grew at a 3.5% annual rate in the third quarter, ending a string of declines over four quarters that resulted in the most severe slide since the Great Depression.
The growth, reported by the government Thursday morning, was slightly stronger than expectations. Economists surveyed by Briefing.com had forecast 3.2% growth in gross domestic product, the broadest measure of the nation’s economic activity. The economy shrank at a 0.7% rate in the second quarter.
The positive GDP report is one more sign that the economy has likely pulled out of the deep recession that started in December 2007.
The reading by itself doesn’t mark an end to the recession; the economy actually grew in the second quarter of 2008. (The National Bureau of Economic Research, which officially dates the beginning and end of recessions, is not expected to declare that the current recession has ended until sometime in 2010.)
But the stronger-than-expected growth is likely to lead more economists to declare that the economy hit bottom earlier this year and turned higher at some point in the summer.
A rebuilding of inventories by businesses that had slashed production and jobs over the past year was a major contributor to the growth in the third quarter. So was a rebound in auto sales, which were helped by the government’s Cash for Clunkers program. The economic stimulus package, with public works projects and aid to state and federal governments, also boosted growth.
But the fact that much of the gain was from these short-term programs raises some concerns about whether the economy can keep growing over the next few quarters.
(Source: CNN)
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8 Responses
If you accept Keynesian economic theory, and it appears that the Obama administration is more Keynesian than Lord Keynes ever was, the stimulus spending should trigger an economic recovery. That is what appears to have happened at least in the short run. The government has printed massive amounts of money, which stimulates spending (it wasn’t for nothing that the chairman of the Federal Reserve is known as “Helicopter Ben” for his famous idea of throwing money out of a helicopter to fight a depression).
Certainly the people who have benefitted from the stimulus are feeling prosperous (they are the ones buying the homes at reduced rates, getting subsidized new cars, getting hired for government projects, working for banks that are in business only because the government bailed them out, etc.). Of course if you are unemployed, or you have a mortgage that is more than the house is likely to be worth in the near future, you might not be so happy.
Lord Keynes is also known for a famous quote to the effect that in the “long run we are all dead”, and the “long run” for most politicians runs up to the next election. Whether the economy is booming in 12 months, and especially in 36 months, will determine if the next generation will be subject to left wing Democrat control.
The economy is not fundamentally strong, and these numbers as the article shows are because of short term programs. The key indicators: unemployment, savings, credit defaults, housing prices all don’t look good. This is nothing more than an attempt by the administration to try to make themselves look good.
The stock market has come down crashing in the last few days. Why? Because the economy is not good and most people know that. At a time when banks report profits thanks to our bailout funds, the average American is suffering!!!
Also, we can expect the govt to restate the numbers in a few months based on new assumptions not originally calculated. America doesn’t fall for it anymore – and judging by things, America is the steps behind the world in recovery.
So thank you Obama for keeping us in a recession. The pundits have always said that poor economics is good for the Democrats as it gives them a larger support base, and we now see they might be right.
When we open the papers and read about companies with Billions in dept, while the executives get paid millions, there is no hope for recovery. We need to bring economy back to basics where people can afford the basics, and those that are rich earned it!
what they didnt state was that after a recession, the GDP usually bounces back to 6-8%, so in reality 3.5% is bad news and it tells us that the recovery will be slow…….
This is a joke, right??
What Obama, Its all Hashem.
Yea, from flea market sales of peoples’ belongings.
welcome to ECON 101.
GDP=C+I+G+(X-M)…GDP=Consumer spending +Investment+Government Spending+ Net Exports
This rise in GDP is caused by the simple increase in Government spending. Imagine paying one credit card with another…it means nothing…I wouldn’t be surprise me if this 3.5% was revised after November 3rd…
cnn “reported” it so we know its hypocrisy.
for people getting excited about this stat and its “proof” that Obama Marxist polices arent killing the country, you must be the same fools that get overly excited about the market going up a point or two.