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GDP Back to Positive

October 29th, 2009 Michael McDonough

The BEA’s advance estimate of 3Q GDP indicates that the economy grew at an for the first time since 2Q08 at annualized 3.5% pace.  The most surprising data from the report was a relatively robust increase in personal consumption which grew at 3.4% during the quarter–contributing 2.4% to the quarters 3.5% growth.  The primary driven behind consumption’s robust performance was likely fiscal stimulus, including  the US government’s ‘Cash for Clunkers’ program.  As expected inventories declined by only -USD130.8bn compared to -USD160.2bn, which contributed 0.9% of the quarter’s growth.  Also of interest is the fact that residential investment for the first time since 4Q05 showed positive growth, gaining 23.3%.  But, given the temporary driver’s behind 3Q’s better than anticipated GDP report, and the numerous headwinds that remain in place for consumers, GDP growth should begin to diminish in the quarters ahead and eventually level off below trend–2.0%. Nevertheless, despite what will likely turn into sluggish growth next year, will still be positive and not negative as we have experienced over the last several quarters.

Source: BEA

Source: BEA

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