Total output grew at an estimated annual rate of 2.5 percent from July to September, still modest but almost double the 1.3 percent rate in the second quarter, the department reported.
The pace, however, wasnot brisk enough to recover the ground lost in the economic bust, lower unemployment or even substantially dispel fears of a second recession. Still, the report offered a small helping of reassurance.
“It ain’t brilliant, but at least it’s heading in the right direction,” said Ian Shepherdson, the chief United States economist for High Frequency Economics, a data analysis firm. “I want to see 4 percent, but given that people were talking about a new recession, I’ll take 2.5 or 3, thanks very much.”
The consensus forecast of economists shows continued growth at about a 2 percent rate for the rest of this year and all of 2012. That would be an improvement over the first half of this year, but a strong recovery would require a rate closer to 4 percent. In the 25 years prior to the recession, the United States economy grew at about 3.25 percent a year, though demographic changes have led to lower expectations for future growth even in a healthy economy.
This economy is still a flurry of mixed signals. Real income has declined, but so has the number of people filing for unemployment, a trend that continued in the number of new claims announced Thursday morning.
The stock market has rallied but consumer confidence has plummeted to levels last seen in 2008. That sentiment helped push pending sales of existing U.S. homes down for a third successive month during September, the National Association of Realtors reported on Thursday.
The economy may be growing, but Americans cannot feel it.
“For most people, they’re unable to really make a distinction between a recession and just 2 percent growth, which means the economy is growing so weakly it can’t hire enough people to make a dent in unemployment,” said Bernard Baumohl, the chief economist for the Economic Outlook Group.
Thursday’s numbers showed a larger than expected increase in consumer spending, fueled by purchases of durable recreational goods like televisions. Personal spending increased by 2.4 percent, accounting for the lion’s share of the growth.
But business investment, which has been strong throughout the recovery, continued to grow as well, with a 13.3 percent increase in non-residential building and a 17.4 percent increase in equipment and software purchases.
Growth in residential construction slowed, but spending on furniture and appliances picked up. Government spending stayed flat, with a reduction in state, local and federal non-military spending canceled out by an increase in defense spending.
The growth rate was weighed down by a meager increase in inventories, which Mr. Shepherdson said he expected would turn out to have been higher than believed. The initial G.D.P. report is based on estimates and is subject to multiple revisions.The growth that economists expected in the first part of the year was dampened by shocks like blizzards, a spike in gasoline prices and the earthquake in Japan, which disrupted the global supply chain. Those effects were fading away by the third quarter, economists said.
But other risks still loom, from Europe’s debt crisis to the possibility that President Obama’s proposal for renewed stimulus measures, including a payroll tax cut, could fail to get through Congress.
“The better growth performance in the third quarter doesn’t mean that the economy can’t ‘double-dip’ back into recession,” wrote Nigel Gault, an economist with IHS Global Insight, ahead of the report. “But it suggests that it has more momentum than there seemed to be just a month or two ago, and underscores that the primary recession risks are from external shocks, with Europe the biggest wild card.”
On the domestic front, analysts seemed to be betting that the payroll tax cut would continue, but were divided on the odds that extended unemployment benefits would be renewed. The two programs together represent spending power equal to about 1 percent of G.D.P., though some of that money may go into savings or be spent on imported goods.
More pessimistic economists fear that the third-quarter growth will be unsustainable because housing values remain low and consumers, whose spending accounts for more than 70 percent of G.D.P., have little reason to expect that their financial situation will improve. The increase in consumer spending was accompanied by a drop in the savings rate and an inching upward of credit card debt, possibly to accommodate purchases that could no longer be delayed.
“That is unlikely to continue if the economy grows weakly because Americans are much more conscious about adding on a lot of debt to their balance sheet,” said Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, which tracks consumer and executive sentiment. The negative outlook was beginning to spread to businesses, Ms. Bostjancic said.
“C.E.O. confidence is starting to melt away, along with consumer confidence levels, which have always been low,” she said.
This article has been revised to reflect the following correction:
Correction: October 27, 2011
An earlier version of this article gave an incorrect name of the company where Nigel Gault works. It is IHS Global Insight, not HIS Global Insight.
Article source: http://www.nytimes.com/2011/10/28/business/economy/us-economy-shows-modest-growth.html?partner=rss&emc=rss