Wikinvest Wire

The recession is (unofficially) over!

Thursday, October 29, 2009

The Department of Commerce reported that the U.S. economy expanded in the third quarter for the first time in a year, the improvement driven by government subsidized consumer spending and an increase in homebuilding.
IMAGE The nation's broadest measure of economic activity grew at a seasonally adjusted annualized rate of 3.5 percent during the July-to-September period following four consecutive quarters of contraction, the longest and deepest contraction in the post WWII era.

In the graphic below, the role of consumer spending is clear to see. After an average contribution of -0.86 percentage points since the recession began in late-2007, personal consumption added a whopping +2.36 percentage points last quarter, a total that was greatly influenced by the wildly popular Cash for Clunkers program.
IMAGE The increase in private domestic investment above - a contribution of +1.22 percentage points during the third quarter - was due to a combination of inventory changes and higher levels of residential construction, but, based on recent data from the homebuilders, the latter is likely to stabilize, at best, and perhaps reverse in the fourth quarter.

The personal consumption figures are striking, overall gains driven by a surge in purchases of durable goods, primarily automobiles. Total consumer spending was the highest since the first quarter of 2007 and, in a sign of just how much consumers have pulled back over the past year or so, the third quarter "surge" in spending appears rather ordinary when compared to the entire period from 1998 to 2006 as shown below.
IMAGE Whether or not these trends continue in the fourth quarter remains to be seen, but initial indications are not good for auto sales and homebuilding.

It won't take much to turn the third quarter data negative - remove the personal consumption, residential construction, and inventory change contributions from the current total and, instead of an annual rate of +3.5 percent, it turns into -0.3 percent.

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Real estate in GTA said...

Thank you for those great news!
Hopefully, you are right....
But one question is still do those results influence other countries? Take into consideration geographical or economical connections...because Net exports are still in minus...

Dan said...

Thank god everything's back to normal now; if I can just get my old job back... : )

Anonymous said...

Obviously, the current solutions to the economic troubles are working. Look for more of this over the next five, ten, or fifteen years until a "self-sustaining" recovery develops.

Anonymous said...

"...increase in homebuilding"


Tim said...

Homebuilding bounced off of the all-time lows seen earlier in the year - you can see it here.

beebs said...

Give me 1.8 trillion in a fifteen trillion economy, and I can show you a good time also.

1.8 trillion was the "public debt to the penny" deficit for Fiscal Year 2009.

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