Third-Quarter GDP Grew By 2%

The official numbers are in and the third-quarter GDP grew by just 2%.

That estimate matched the consensus forecasts for the gross domestic product, and is a slight uptick from the second quarter.

Though the recovery officially began in June 2009, growth since then has been tepid, at best. The economy expanded at a 1.7 percent pace in the second quarter, down sharply from a 3.7 percent rate in the first.

In recent weeks, the economy has presented two faces, which is reflected in the latest G.D.P. numbers. There have been fledgling signs of growth: home sales and chain store sales are up bit, a swelling stock market has raised consumer confidence a few notches, and jobless claims fell noticeably last week, albeit to a still quite high and painful level. At the same time, the steroidal effect of the stimulus spending is fading. City and state governments have shed tens of thousands of employees, and states face a sea of red ink as they look at next year’s budgets.

Sigh. This is yet another quarter of subpar growth. For the economy to truly recover, we need to see several quarters of GDP growth over 3%. Over 4% would be even better.

This report is the government’s first attempt at an estimate. The report will be revised two more times, at the end of November and at the end of December, and it will probably be revised a few more times after that.

The trouble is that the government tries to estimate the trade numbers for the last month of the quarter. They give it a good effort, but we never know exactly. For the third quarter, it turns out that trade knocked off 2% from the final number. Excluding trade, the economy grew by 4%.

Here are the GDP numbers for the past few quarters:

Quarter GDP Growth
Dec-07 2.90%
Mar-08 -0.73%
Jun-08 0.60%
Sep-08 -4.00%
Dec-08 -6.77%
Mar-09 -4.87%
Jun-09 -0.70%
Sep-09 1.60%
Dec-09 5.01%
Mar-10 3.73%
Jun-10 1.72%
Sep-10 1.99%

The good news, if there is any, is that the economy is no longer decelerating, meaning the rate of growth isn’t slowing.

That’s basically what all the Double Dip hype amounted to: it was all in the second derivative. We never dipped. We grew, but the rate of growth dipped. This report has shown a very, very slight acceleration. Very, very, very slight.

Over the last 10 years, real GDP has grown by 17.68% which is just 1.64% on an annualized basis. The economy has grown at a slower pace over the last 10 years than over the three-year period of 1963, 1964 and 1965.

Posted by on October 29th, 2010 at 8:31 am

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