With all the news about Ferguson and other commitments, I missed the news that economic growth in the 3rd Quarter had been revised significantly upward to 3.9% in the latest report from the Department of Commerce:
The nation’s economic output grew at an even faster rate during July, August and September than the government initially estimated, giving the economy its strongest six-month performance in more than a decade.
The intense focus on the coming shopping frenzy as the holiday period begins this week almost made interest in the economy’s third-quarter performance seem like an exercise in nostalgia. But the Commerce Department’s release on Tuesday of its revised estimate of gross domestic product — the broadest measure of goods and services produced across the nation — showed that consumers had already stepped up their pace of purchasing.
The shift in the annual rate of growth to 3.9 percent from 3.5 percent was mainly because of a bigger-than-expected jump in consumer spending, bolstered by a modest increase in reported business investment.
The upward revision was almost exclusively due to much stronger buying by consumers,” said Carl R. Tannenbaum, chief economist at the Northern Trust Company. “I find that very encouraging coming into the commercial side of the holiday seasons.”
While the economic recovery, now into its sixth year, has been lackluster, Mr. Tannenbaum noted that in four of the last five quarters, “growth has moved to a much stronger level.” This 3.9 percent growth rate comes on the heels of a 4.6 percent jump inG.D.P. during the second quarter, after a freezing winter that helped cause the nation’s output to drop at a rate of 2.1 percent in the first three months of the year.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, agreed that “the trend has shifted higher,” although he said he doubted that G.D.P. growth could be sustained at the third quarter’s nearly 4 percent pace.
Falling gasoline prices, which left Americans with more cash for other purchases, partly explain why people could spend more, economists agree.
The G.D.P. figures made the drop in the Conference Board’s latest measure of consumer confidence to 88.7 in November from 94.1 in October all the more of an anomaly. Other surveys, including the Rasmussen index, have shown confidence surging.
Consumer spending is a closely watched figure because it accounts for 70 percent of economic activity and must advance at a steady rate to power the economy forward.
But it is business investment, including the rise and fall of inventory accumulation, that most influences economic turning points. Nonresidential investments grew by 7.1 percent, while investment in equipment reached 10.7 percent.
All in all a good report headed into the 4th Quarter, which for many businesses is the most important quarter of the year, and an indication that while economies in Europe and China continue to languish to some degree, the U.S. economic engine is going fairly strongly.
