US real GDP (gross domestic product) -- the output of goods and services produced by labour and property located in the United States -- increased at an annual rate of 3.5 percent in the third quarter (Q3) of 2009, (that is, from the second quarter to the third quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 0.7 percent.
Motor vehicle output, boosted by the "cash for clunkers" rebate program, added 1.66 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change. Final sales of computers subtracted 0.11 percentage point from the third-quarter change in real GDP after subtracting 0.04 percentage point from the second-quarter change.
The BEA summarised the data as follows:
The rise in real GDP reflected the following:
- Consumer spending turned up strongly. Spending on new cars and trucks was a big contributor, reflecting the federal “cash for clunkers” program, which was in effect in July and August.
- Housing increased for the first time in 15 quarters.
- Inventory investment, exports, and government spending also added to growth.
Prices
- Prices of goods and services purchased by US residents increased 1.6 percent in the third quarter after increasing 0.5 percent in the second quarter, mainly reflecting an upturn in energy prices.
- Excluding food and energy, prices rose 0.5 percent after rising 0.8 percent.
Personal Income
- In the second quarter, personal income was boosted by government payments to recipients of social security and other benefits enacted in American Recovery and Reinvestment Act (the Obama administration's $787 billion stimulus program). Coming off those payments, personal
income declined in the third quarter.
- Current-dollar personal income fell 0.5 percent after rising 0.6 percent. Real disposable personal income - - income adjusted for inflation and taxes—declined 3.4 percent in the third quarter after increasing 3.8 percent in
the second quarter.
- The personal saving rate - -personal saving as a percent of current-dollar disposable personal income - -was 3.3 percent in the third quarter. In the second quarter, it was 4.9 percent.
The Wall Street Journal reported earlier that the US economy was about to post growth numbers reminiscent of the good old days, otherwise known as the "old normal." But a "new normal" of slower growth might be inevitable.
The Journal said economists estimated GDP grew at a 3.2% annualized rate, after shrinking 0.7% in the second quarter. A handful of economists expected growth of 4% or higher.
Among the reasons for growth: Companies dumped inventory in the third quarter, though less aggressively than during the previous three months. By the maths of GDP accounting, merely slowing down inventory liquidation will boost GDP's growth rate by at least one percentage point, according to many estimates.
Morgan Stanley economists said earlier this month that double-dip recession fears were returning as the ‘second-derivative' in the US economy had turned negative, with incoming data calling into question both the strength and sustainability of the recovery. That's consistent with the MS view that a hearty Q3 revival would give way to a wobbly Q4. But the economists said that this bumpy start to recovery neither presages a double dip nor serves as a harbinger of a ‘new normal' 2% growth path for the US economy.
Rather, they continued to think that a moderate, sustainable expansion will emerge, one that eventually stabilizes inflation, revives private credit demands, and lifts real bond yields. Consequently, they say they are still comfortable with their view that the Fed will begin to renormalize interest rates in mid-2010.
