USA posts a 3.5% GDP growth

Very strong GDP numbers for America... MarketWatch reports:

The U.S. economy expanded at a 3.5% annual pace in the third quarter, as massive government stimulus helped drag the economy out of the longest and deepest recession since the 1930s, the Commerce Department estimated Thursday.

Along with improvements in key monthly figures on output and sales, the rise in real gross domestic product means the Great Recession is likely over in a technical sense, even as further job losses occur. A formal call on the end of the recession isn't expected for months. Read more about recessions.


In the past year, the economy has contracted 2.3%. The economy shrank 0.7% annualized in the second quarter and 6.4% in the first quarter. The figures are seasonally adjusted and adjusted for price changes.

Growth was broad-based in the third quarter, with final U.S. sales rising at a 3% annual pace, the fastest in more than three years.

Third-quarter growth was due to higher consumer spending, a slowdown in the reduction of inventories, an increase in residential investments, and robust government spending.

Home building contributed to growth for the first time in nearly four years.

Business investment declined as a small increase in capital spending on equipment and software was overwhelmed by another large drop in investments in structures.

Foreign trade subtracted from growth in the quarter. A big jump in exports was offset by an even larger rise in imports.

IANAE but I like to think that anything over 3% real for a developed country as strong growth. This probably marks the end of the recession.

However, as quoted above, a lot of the growth is driven by areas that are unsustainable. For instance, homebuilding and government spending contributed to growth but I highly doubt that can be maintained.

The strong GDP growth numbers also mark how my macro call was incorrect. I was thinking that America wouldn't recover until 4Q09 or 1Q10 but it appears I was incorrect. I also thought that the stock market rally would be coincident with the economic recovery—this is rare; most of the time the market rallies 6 months to 9 months ahead of recover—but was wrong. As in the past, it appears that the stock market correctly "forecast" a recovery well ahead of time.

Having said all that, I'm still maintaining my view that the US economy will be in a mild slump, with GDP growth around 2% for the next few years. We'll see how correct that call ends up being.


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