Revised U.S. GDP barely exceeds low third quarter expectations
U.S. GDP growth in the third quarter has been revised to a higher rate than reported earlier. However, as the economy struggles to get in gear, that’s not saying much. U.S. gross domestic product expanded at a 2.5 percent annual rate from July through September, about half the rate needed to affect the unemployment rate.
Consumer spending drives U.S. GDP
Gross domestic product, the value of goods and services produced in the U.S., is used as a broad measure of economic growth. The 2.5 percent growth of U.S. GDP in the third quarter was driven by consumer spending and increased exports. According to a Commerce Department report, consumer spending was predicted to rise 2.6 percent but increased at a 2.8 percent annualized pace, the strongest result since 2006. Exports were revised upward to 6.3 percent from the 5 percent originally reported. The U.S.economy expanded 3.2 percent in the past four quarters, the strongest year-over-year growth since the first quarter of 2005.
Obstacles to economic growth
The Commerce Department report also revised wages and salaries in the second quarter upward from a $51.1 billion increase to a $97.4 billion increase from the first quarter. The new figures suggest that consumers could have the resources to continue supporting economic growth in the near future. But the increase in consumer spending isn’t expected to be enough to offset the drag of a moribund housing market. Prices remain depressed by anemic sales and a huge inventory of unsold homes and foreclosures. The National Association of Realtors said existing-home sales slipped 2.2 percent in October. The median price for a home sold in October dropped 0.9 percent from a year ago.
High unemployment will persist
Most economists agree that a U.S. GDP annualized growth rate of 2.5 percent does nothing to move the unemployment rate downward. The consensus is that until GDP hits at least 5 percent growth, unemployment will be stuck at 9.6 percent. Growth is forecast at about a 2.3 percent rate for the rest of the year.