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Economy in Brief
U.S. Durable Goods Report: Strong Headline, Weaker Details
New orders for durable goods increased 1.2% (3.5% year-on-year) during December following an upwardly-revised 1.0% gain...
U.S. Existing Home Sales Continue to Slide
The National Association of Realtors reported that sales of existing homes fell a greater-than-expected 1.2% in January...
Philadelphia Fed Manufacturing Index Tumbles in February
The Philadelphia Federal Reserve reported manufacturing conditions weakened considerably in February with its General Factory Sector Business Conditions Index...
U.S. Initial Claims for Unemployment Insurance Decline
Initial claims for unemployment insurance fell to 216,000 in the week ended February 16, down 23,000 from the previous week's...
EMU PMIs Continue to Move Together...Mostly Lower
The composite EMU German and French indices all rose by small amounts...
by Tom Moeller October 29, 2009
The U.S. economy grew last quarter at hardly a barn-burning rate, but at least it was positive for the first time in over a year. Real GDP during 3Q'09 grew at an expected 3.5% annual rate after a 3.7% decline since late-2007. The rise was fueled by upturns in domestic demand and inventories but lessened by deterioration in the foreign trade deficit. Consensus expectations are that economic growth will continue in coming quarters at roughly a 3.0% rate which, by postwar standards, would be subpar.
Domestic final demand growth was positive for just the second
quarter since 1Q'08. The upturn owed to a 3.1% gain in consumer
spending (-0.3% y/y) that was led by a 22.8% rise in durables
consumption. The Cash for Clunkers sales incentive program by
auto-makers caused motor vehicle consumption to jump at a 56.4% annual
rate, though it still was up just 1.4% from one-year earlier.
Elsewhere, personal consumption of furniture grew at a 6.4% (-5.9% y/y)
rate following a like downturn during 2Q. Spending on clothing
& shoes fell at a 1.5% (-5.1% y/y) rate while services spending
gained a modest 1.8% (0.4% y/y).
In the fixed-investment side of the GDP accounts, residential
spending also grew for the first time since 1Q'06. The 23.3% rise
(-18.1% y/y) followed a 2Q decline of similar magnitude. During the
downturn, which spanned three years, residential investment fell by
more than one-half. Continuing to the downside at a 2.5% (-18.9% y/y)
rate was business investment. The decline was led by a 9.0% (-20.8%
y/y) drop in spending on structures though equipment spending rose a
modest 1.1% (-17.9% y/y). That increase was led by a gain in
transportation equipment spending (-47.2% y/y) and an upturn in
information processing equipment & software (-6.4% y/y).
Government investment rose at a 2.3% rate (1.8% y/y) led by a gain in
defense spending (5.0% y/y).
Inventory accumulation made a positive contribution to GDP
growth for just the second time in two years. The modest 0.9% addition
followed subtractions of 1.4 and 2.4 percentage points during the prior
two quarters.
For the first time in a year, deterioration in the foreign trade deficit lowered GDP growth. The 0.5 percentage point subtraction was due to a 16.3% (-14.9% y/y) rise in real imports which outpaced the 14.7% (-11.2% y/y) gain in exports.
The GDP price deflator rose a slim 0.8%. Though the PCE price index gained 2.8% (-0.6% y/y), the rise in the overall domestic final sales price index was held to just 1.6% (-1.0% y/y) as the fixed investment price index fell sharply (-2.5% y/y).
Chained 2005$, % AR | 3Q '09 | 2Q '09 | 1Q '09 | 2Q Y/Y | 2008 | 2007 | 2006 |
---|---|---|---|---|---|---|---|
GDP | 3.5 | -0.7 | -6.4 | -2.3 | 0.4 | 2.1 | 2.7 |
Inventory Effect | 0.9 | -1.4 | -2.4 | -1.2 | -0.4 | -0.4 | 0.1 |
Final Sales | 2.6 | 0.7 | -4.1 | -1.5 | 0.8 | 2.5 | 2.6 |
Foreign Trade Effect | -0.5 | 1.7 | 2.6 | 0.9 | -1.2 | 0.8 | 0.1 |
Domestic Final Demand | 3.0 | -0.9 | -6.4 | -2.4 | -0.4 | 1.7 | 2.5 |
Chained GDP Price Index | 0.8 | -0.0 | 1.9 | 0.7 | 2.1 | 2.9 | 3.3 |