GDP Grows at 8.2 Percent Annual Rate

[packetjunkie]

WASHINGTON — The U.S. economy, propelled by tax cuts and low interest rates, roared ahead at an 8.2 percent annual rate in the third quarter, the best showing in nearly 20 years, while Americans' incomes and spending both showed healthy gains in November.

The government reports Tuesday on the gross domestic product), the country's broadest measure of economic health, and personal incomes and spending provided further evidence that the economy was convincingly shaking off a prolonged period of lethargy and beginning to fire on all cylinders.

The Commerce Department (search) report that the GDP grew at an 8.2 percent rate in the third quarter, propelled by a surge in consumer spending, was identical to the preliminary estimate made a month ago and represented the strongest growth since an 8.4 percent rate of increase in the fourth quarter of 1983.

In a separate report, the government said consumers were remaining active in the current quarter with consumer spending rising by 0.4 percent in November, the best showing since August, and incomes, helped by rising employment levels, posted an increase of 0.5 percent last month, the best gain since May.

Many analysts believe that GDP growth in the current quarter could well top 5 percent, representing the best back-to-back growth rates since the boom years of the 1990s.

The economy began the year growing at much slower rates of 2 percent in the first quarter and 3.1 percent in the second quarter before the jolt from a new round of tax cuts propelled consumer spending in the third quarter.

Growth has also been helped this year by the Federal Reserve's (search) decision to keep a key interest rate at the lowest level in 45 years, providing strength to such interest rate-sensitive sectors as housing and auto sales.

All of the GDP figures released Tuesday reflected a comprehensive revision that the government does every five years to make sure the measurement of total output keeps up with the times. With the changes, the GDP grew by 2.2 percent for all of 2002, down slightly from the previous estimate of 2.4 percent.

The benchmark revisions and the changes to third quarter GDP showed a number of crosscutting revisions that basically offset each other to make little impact on the bottom-line number.

For the third quarter, consumer spending was revised up to an even-stronger 6.9 percent rate of growth, the best showing since the third quarter of 1986, compared to last month's estimate of 6.4 percent.

But private investment, which covers housing construction and business spending on plants and equipment, was revised down to a 14.8 percent rate of increase, reflecting slightly less business investment which offset a bigger increase in housing construction.

Even with the strong growth, inflation remained under control with a price gauge tied to the GDP rising at an annual rate of just 1.8 percent in the third quarter.

The monthly incomes and spending report showed that 0.4 percent November jump in consumer spending, which accounts for two-thirds of total economic activity, followed a tiny 0.1 percent rise in October and no change at all in September. However spending had soared by 0.9 percent in August, reflecting the burst of activity spurred by the tax cuts which went into effect in July.

The 0.5 percent rise in personal incomes followed much smaller increases of 0.2 percent in October and 0.3 percent in September. The strength last month came from a big wages and salaries, which rose by $16 billion in November compared to an October gain of $8.2 billion.

After an extended period of layoffs, employers have begun adding workers to their payrolls, which should help bolster incomes even more in coming months.

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[Toby]

We are reporting record sales for the last 1/4 of 2003 and 2004 will be our biggest year ever so from what I see in my little corner of the world...I agree with the above!

:thumb: :thumb:

I hope everyone has a great 2004. Let's all make some serious cash!

[SnowMann]

Only indicator that really matters is unemployment numbers, once I see those greatly improve I will vote for Bush.

[Cherm]

Good post!

Employment is a lagging indicator and we should expect to see the number trend down as this recovery takes hold next year. Though it is hardly the indicator that "only matters". Obviously, if you are currently unemployed is would be but for the 94% of the workforce that isn't the other metrics are especially important. I was able to hire six people in 2003, after laying off five in 2001/2002 and should be adding another 2 by the end of Q2 2004. The pipeline is full again!

This economic report is AMAZING and COMPLETELY VALIDATES the Presidents' economic plan / tax cuts. COMPLETELY do away with the ILLEGAL CAPITAL GAINS TAX and the remanding dividend taxes and we would see an explosion in capital investment that bring GDP to $12 trillion in two years, increase savings rates; keep interest rates low, etc..

If you look at what our economy has gone through over the past two years, it just boggles the mind how flexible and resilient it can be. Though, I credit all of us a hell of a lot more than anyone in Washington, I applaud the President for having the political backbone for not wavering and seeing his policies through even when the political landscape began to change. It is great to have someone in office you can TRUST!

The current 5.9% rate of unemployement is not high at all and we should not expect to see anything below 5% for the foreseeable future. You just cannot have the UNREAL level of productivity growth that we have had and expect a jobs boom at the same time. 5% would represent a level that's about the same as Japan as about 1/2 the Euro-zone.