Economy Surpasses Third Quarter Expectations
Reaching its strongest six-month performance in more than 10 years, the nation’s economic output grew faster in July, August, and September than initially estimated by the government. Much of the focus has been on the upcoming holiday shopping frenzy. According to information released from the Commerce Department, gross domestic product showed that people are already doing more spending.
The annualized rate of growth went from 3.5% to 3.9%, primarily due to a bigger-than-expected jump in consumer outlays that were bolstered by a modest increase. As stated by Carl Tannenbaum, chief economist at the Northern Trust Company, this upward swing is almost completely due to stronger consumer buying. He added that this is extremely encouraging going into the holiday seasons.
While the economy is in its sixth year of recovery, it has remained lackluster. Tannenbaum noted that in four of the last five quarters, growth has become stronger with the 3.9% growth rate following the 4.6% increase in gross domestic product during the second quarter and after an unordinary cold winter that pushed the nation’s output to fall 1.7% for the first three months of 2014.
Agreeing is Ian Shepherdson, chief economist at Pantheon Macroeconomics who said that the trend has moved higher although he was not sure gross domestic growth could sustain at the nearly 4% rate seen in the third quarter.
Economics believe that consumers are spending more due to declining prices at the gas pump combined with increasing consumer confidence. Also up was business investment. For non-residential investments, growth was reported up by 7.1% while equipment investment climbed 10.7%. Also up was residential housing by 2.7% and government spending that grew 4.2%, although not quite as high as estimated.
Jerry Webman, chief economist at Oppenheimer Funds stated that he was encouraged by the increase in business investment spending, which shows business confidence in building has improved. In return, hiring should continue to climb.
Pushing down the unemployment rate was the economy’s growth. Just last month, jobless claims hit 5.8%, dropping 1.4% points from the same time last year. For the past nine months, more than 200,000 jobs have been added.
On Monday, July Hotchkiss, research economist and senior policy advisor with Atlanta-based Federal Reserve Bank reported that disputed claims associated with newly created jobs focused on part-time and low quality positions. Of the 8.2 million people added to the job pool since October 2010, 95% or 7.8 million are still employed full time. However, not growing are wages that are not keeping up with the low inflation rate.
Even so, the US economy remains bright in the global economy. Just recently, central banks in Europe and Japan moved to nudge lackluster economies forward by reducing interest rates. Within the US, the latest figures for gross domestic product led economist to believe that the Federal Reserve will move in the opposite direction in 2015.
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