For the first time in more than a year, GDP grew in the United States. GDP increased in the July through September quarter by 3.5 percent versus the prior quarter. In the second quarter, GDP declined by 0.7 percent. The consensus estimate was for an increase of 3.3 percent, so GDP climbed by more than economists expected.
According to the Commerce Department, the increase came from an increase in personal consumption, exports, private inventory investment, federal government spending, and residential fixed investment. Not surprisingly, with the cash for clunkers program, motor vehicles added 1.7 percent to the GDP total, up from 0.2 percent in the prior quarter.
Personal consumption increased by 3.4 percent, versus a drop of 0.9 percent in the second quarter. Durable goods purchased by consumers surged by 22.3 percent, largely driven by the cash for clunkers program. The comparable figure in the second quarter was a drop of 5.6 percent. But the increase in personal consumption wasn't limited to autos. Nondurable goods increased by 2.0 percent and services increased by 1.2 percent. In the second quarter, those sectors showed a drop of 1.9 percent and an increase of 0.2 percent, respectively.
Exports and government spending increased as well. Exports increased by 14.7, versus a drop of 4.1 percent in the second quarter. Who says that the United States doesn't have a manufacturing sector anymore? And federal government spending slowed its rate of increase, up 7.9 percent, which was lower than the 11.4 percent increase in the second quarter.
Analysts said that while the return to growth was a positive sign, it remains to be seen whether consumer spending can continue to grow. With over seven million jobs lost since the beginning of the recession, consumers will remain challenged. Also, the economy received a one time boost from various stimulus programs, and some analysts question whether the economy will continue to grow after those programs end.
On the jobless front, initial claims dropped to 530,000, a decrease of 1,000 from the prior week. Continuing claims also declined to 5.8 million, down by 148,000 from the prior week's figure of 5.9 million. The consensus estimate was for a decline of 5,000 in the initial claims figures, with estimates ranging from a decline of 16,000 to an increase of 9,000.
The drop in continuing claims took that number to the lowest level in seven months, consistent with the return to growth shown by the GDP number.
Only one state, California, reported an increase in unemployment claims of more than 1,000. California's increase of 5,774 claims was due to increased layoffs in the construction, trade, service, and agricultural industries. In contrast, 19 states reported a decrease in claims of more than 1,000.
Analysts said that companies are laying off less people as they see a return to economic growth, driven in part by government stimulus, stabilization in the housing market, and an improving manufacturing sector. This led Chicago Fed chairman Charles Evans to say that the "job destruction wave" has probably ended.
All in all, this morning's economic data was good. This breaks the streak of disappointing numbers from earlier this week. It shows an economy that's recovering, although not as quickly as anyone would like.
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According to the Commerce Department, the increase came from an increase in personal consumption, exports, private inventory investment, federal government spending, and residential fixed investment. Not surprisingly, with the cash for clunkers program, motor vehicles added 1.7 percent to the GDP total, up from 0.2 percent in the prior quarter.
Personal consumption increased by 3.4 percent, versus a drop of 0.9 percent in the second quarter. Durable goods purchased by consumers surged by 22.3 percent, largely driven by the cash for clunkers program. The comparable figure in the second quarter was a drop of 5.6 percent. But the increase in personal consumption wasn't limited to autos. Nondurable goods increased by 2.0 percent and services increased by 1.2 percent. In the second quarter, those sectors showed a drop of 1.9 percent and an increase of 0.2 percent, respectively.
Exports and government spending increased as well. Exports increased by 14.7, versus a drop of 4.1 percent in the second quarter. Who says that the United States doesn't have a manufacturing sector anymore? And federal government spending slowed its rate of increase, up 7.9 percent, which was lower than the 11.4 percent increase in the second quarter.
Analysts said that while the return to growth was a positive sign, it remains to be seen whether consumer spending can continue to grow. With over seven million jobs lost since the beginning of the recession, consumers will remain challenged. Also, the economy received a one time boost from various stimulus programs, and some analysts question whether the economy will continue to grow after those programs end.
On the jobless front, initial claims dropped to 530,000, a decrease of 1,000 from the prior week. Continuing claims also declined to 5.8 million, down by 148,000 from the prior week's figure of 5.9 million. The consensus estimate was for a decline of 5,000 in the initial claims figures, with estimates ranging from a decline of 16,000 to an increase of 9,000.
The drop in continuing claims took that number to the lowest level in seven months, consistent with the return to growth shown by the GDP number.
Only one state, California, reported an increase in unemployment claims of more than 1,000. California's increase of 5,774 claims was due to increased layoffs in the construction, trade, service, and agricultural industries. In contrast, 19 states reported a decrease in claims of more than 1,000.
Analysts said that companies are laying off less people as they see a return to economic growth, driven in part by government stimulus, stabilization in the housing market, and an improving manufacturing sector. This led Chicago Fed chairman Charles Evans to say that the "job destruction wave" has probably ended.
All in all, this morning's economic data was good. This breaks the streak of disappointing numbers from earlier this week. It shows an economy that's recovering, although not as quickly as anyone would like.
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