Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

U.S. Real GDP Momentum Pickup Buys Time Before Fed Acts Again

Economics / US Economy Oct 28, 2011 - 05:25 AM GMT

By: Asha_Bangalore

Economics

Best Financial Markets Analysis ArticleReal gross domestic product (GDP) of the U.S. economy grew at an annual rate of 2.5% in the third quarter after registering an abysmally slow performance in the first-half of the year (+0.9%). The headline and details of the third quarter GDP report are both encouraging given that considerations of a double dip surfaced in recent weeks.



The level of real GDP in the third quarter now surpasses the peak reached in the fourth quarter of 2007 (see Chart 2), which allows us to note that the U.S. economy has entered a phase of expansion in the current business cycle. Real GDP estimates of earlier quarters had reached this mark only to be revised away. Final sales, which exclude inventories, posted a robust increase of 3.6% in the third quarter after 1.6% gain in the second quarter.

Consumer spending advanced at a significant pace in the third quarter (+2.4% vs. +0.7% in 2011:Q2). Among the three components of consumer spending, durable goods (+4.1%) and services (+3.0%) posted strong gains, while expenditures on non-durables were nearly steady. The worrisome part is that the increase in consumer spending in the third quarter was accompanied by a drop in real disposable income (Chart 3) and the saving rate (Chart 4). The obvious conclusion is that the consumers spent more than their income in third quarter. Will the upward trend of saving snap back in the near term? The best guess is that soft employment and income growth suggests that a conservative consumer will prevail in the months ahead.

Business spending grew at a rapid clip in the third quarter, both structures (+13.3%) and equipment and software spending (+17.4%) show noticeable growth. These numbers run counter to claims that uncertain economic conditions are holding back business spending. Exports of goods and services grew at an annual rate of 4.0% in the third quarter, slightly higher than the pace seen in the prior quarter.


The big surprise in today’s report was the large drop in inventories during the third quarter ($5.4 billion vs. $39.1 billion in the second quarter). Businesses are likely to add to their stockpiles in the near term and account for a large increase in headline GDP, but the timing of this event is unclear, for now. Inflation numbers point to a moderation in the third quarter. The personal consumption expenditure price index rose 2.4% in the third quarter vs. a 3.3% jump in the second quarter. Likewise, the core personal consumption expenditure price index, which excludes food and energy, advanced 2.1% in the three months ended September vs. a 2.3% increase in the previous three-month period. The moderation in inflation data works in favor of the doves in the FOMC and supports their case for additional monetary policy action.


The FOMC meeting of November 1-2 is likely to end without changes in Fed policy, following unconventional announcements after the August and September meetings. Incoming economic data present a mixed picture, which allows the FOMC time to confirm that additional support may be necessary to bolster economic activity before taking action at the December or January meetings. In the past week, several Fed officials, have been presenting arguments that make a case for a third round of quantitative easing (QE3). The elevated unemployment rate is at the top of their list of concerns. Although details of the resolution of the debt crisis in Europe are not available as of this writing, a compromise has been reached regarding the Greek debt problem and further strengthening of the European Financial Stability Fund is in the offing. The bottom line is that headwinds from Europe seen to be large and detrimental a few days ago may not occur implying that downside risks to U.S. economic growth in the near term have been reduced.


Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2011 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules