The US Department of Commerce has issued its report on the growth of the US economy for the period between July and September, and the 3.5% growth rate has some people cheering. However, most observers note that much of the growth has been boosted by government programs and spending, and the foundation remains unstable. Even the BBC questions just how positive the news is in their article on the initial numbers
Of course, the initial comments were about how the 3.5% increase was above the 3.3% consensus forecast and that it was the first growth since the second quarter of 2008 when the economy grew 2.4%. Interestingly if you look at the attached chart you'll see that the US economy has not had strong growth since the third quarter of 2007, which should give those declaring a victory over the recession considerable pause, its clear that any recovery is still forming. As even the BBC notes in its article about the recovery.
Analysts say the growth was helped by the "cash for clunkers" car scrappage scheme, and the fear is growth will now fall after this ended in August.
And this should be the main focus when looking at the growth for the last three months. The BBC goes on to note that there are two sectors which grew strongly during the third quarter, but they were durable manufactured goods (cars)
Spending on durable manufactured products soared at an annualised rate of 22.3%, the highest quarterly amount since 2001, led primarily by the impact of the cash for clunkers scheme lifting car sales.
And housing
The housing market also improved, with spending on housing products up 23.4%, its largest quarterly jump in 23 years.
Analysts said this big leap was sparked by the government's $8,000 tax credit for first-time house buyers.
The economy is going to start growing again, but many of those who will use these third quarter numbers to push a story of a recovery are going to neglect to mention just how much of that recovery was created through deficit spending and incentives which are no longer working. Auto sales slumped immediately after the Cash-for-Clunkers program was stopped, which could cause the durable manufactured products spending to decline again in the last part of 2009, and housing which had been strong thanks to the credit is again slumping as the pool of qualifying buyers runs out and extended unemployment drives more homes into foreclosure.
I think the BBC found an economist who put it best.
"It's good to have the economy growing again," said Brian Bethune, economist at IHS Global Insight.
"But we don't think that rate of growth is sustainable because it is distorted by all the government stimulus.
Comments
And we're just supposed to trust these Government "reports"?
How can they say we're out of a recession when home foreclosures are surging still (see www.foreclosure.com) and auto repossessions are skyrocketing (see www.repofinder.com)?
I'll trust my magic 8 ball over Government "reports".
Wow, it really hurts some folks that the stimulus had a positive impact, doesn't it? They put their disdain for Obama above the good of our country.
First, the complaint was the stimulus wasn't helping. Then, when it's clear it aided a quarter of economic growth and improvement in the economy, there are complaints that the GDP was "distorted" by the stimulus. I'll take that kind of "distortion" any time.
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