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GDP advances, signaling recession's end
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Shopping for appliances (AP Photo/Mark Lennihan)
The worst recession in over 70 years likely came to an end in Q3 as the U.S. Department of Commerce reported that Gross Domestic Product (GDP), the largest measure of goods and services, expanded at an annual pace of 3.5%.
The first rise in GDP in over one year was aided by the government's cash for clunkers program and consumer spending, which added 2.4 percentage points to growth.
Business spending rose for the first time since Q3 2007, and residential construction provided support to economic activity by increasing 23.4% (adding 0.53 percentage points to growth), the first rise in four years, as housing appears to have begun its long road to recovery.
Inflation still tame
On the inflation front, the Personal Consumption Expenditures Index jumped 2.8% on an annual basis amid higher energy prices. Excluding food and energy costs, the core rate of inflation remained well within the Fed's implied comfort range of 1-2%, rising just 1.4%.
With price increases under control, policymakers have plenty of leeway to keep interest rates at current levels as job creation lags gains we are seeing in the economy.
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