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3Q Economic Growth Revised Downward
The Commerce Department’s latest reading on the nation’s
gross domestic product shows that the economy expanded at a
2.2% annual rate in the 3Q, down from a prior reading of
2.8% growth. The revised report showed that consumers didn't
spend as much as first thought (consumer spending grew at a
2.8% annual rate, down from 2.9% in the prior estimate).
Also commercial construction was weaker, business investment
was lighter and companies cut back more on inventories. On
the positive side, it was a quarter of economic growth,
following four straight quarters of decline in what was the
deepest recession since the Great Depression. Moreover, many
economists believe the 4Q will show even higher growth.
Strength in the final quarter is expected to be driven by
companies restocking depleted inventories that were slashed
during the recession. So, even a slight pickup in customer
demand will warrant stepped-up production from factories.
Stronger sales of exports to foreign customers, as well as
spending by U.S. consumers and businesses, should also
contribute to 4Q growth, economists say.
However, economists are hesitant to say the economy will
bounce back in a big way. Much of the 3Q economic growth was
fueled by government spending (including the Cash for
Clunkers program and an $8,000 tax credit for first-time
home buyers). With unemployment expected to remain high and
credit expected to be tight in the months ahead, it is
questionable that there will be enough consumer spending to
generate a robust economic recovery.
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Date Last Updated: 12/28/2009
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