This morning’s advanced estimate from the BEA of 3rd quarter GDP came out better than expected at 3.5% growth. Economist had expected a 3.2% growth rate, according to the Wall Street Journal. And some had recently been predicting an even lower number.
Many are crediting the upturn to the stimulus package, which boosted consumer spending. As the BEA notes:
The upturn in real GDP in the third quarter primarily reflected upturns in PCE [private consumer expenditures], in private inventory investment, in exports, and in residential fixed investment and a smaller decrease in nonresidential fixed investment that were partly offset by an upturn in imports, a downturn in state and local government spending, and a deceleration in federal government spending.
I would, however, note that the last point of government spending. State and local government spending actually declined and federal spending was less than in the 2nd quarter. I’m sure this will fuel both sides of the “next stimulus” debate.
I would also note that contribution of trade is based on incompletely trade data (from only July and August). Continued progress on the trade deficit depends heavily on the value of the dollar. As the Financial Times noted this morning, the dollar fell on the GDP news — which will help exports and hurt imports. Already, however, some of the US’s major trading partners are complaining about the weaker dollar hurting their economies (i.e. their exports). As a story in this morning’s Washington Post notes:
This week, a top aide to French President Nicolas Sarkozy called the value of the dollar “a disaster” for Europe, warning of dire consequences to the global economy if it remains at its current levels
However, as the story all points out:
the Chinese yuan, still closely pegged to the value of the U.S. currency, has fallen just as much as the dollar on world markets, serving up a double whammy to countries with fast-appreciating currencies like the euro. It also means that China, the country that enjoys the single biggest trade surplus with the United States, has actually seen that surplus grow during the recession.
So, be aware, as I noted with the 2Q data, these are advanced estimates subject to revision. The 4th quarter 2008 and the 1st quarter 2009 figures were substantially revised. The 2nd quarter 2009 number was revised from a -1% percent advanced estimate to a -0.7% final. Today’s figure will be similarly revised as more complete trade and other data are available. The August trade numbers were unexpectedly positive (see earlier posting). The September trade numbers come out on Friday, November 13th.