U.S. Economy Continues Expansion

27 October 2011

The U.S. government said October 27 that consumer spending spurred a 2.5 percent annual rate of growth for the American economy in the last quarter.

The U.S. economy grew at an annual rate of 2.5 percent in the July-to-September quarter, driven by consumer spending and continued export growth, though job growth continues to lag, according to the U.S. Commerce Department.

“While the continued expansion is encouraging, faster growth clearly is needed to replace the jobs lost in the recent downturn and to reduce long-term unemployment,” Katharine Abraham, a member of President Obama’s Council of Economic Advisers, said October 27.

The Commerce Department’s Bureau of Economic Analysis released the advance estimate of gross domestic product (GDP) for the third quarter of 2011 on October 27. “Real GDP rose 2.5 percent at an annual rate, consistent with private-sector expectations and up from the 1.3 percent increase in the second quarter and a significant step up from the 0.4 percent gain in the first quarter,” the department said.

“In spite of headwinds hitting the U.S. economy, today’s GDP report — the ninth straight positive quarter — reflects strong consumer spending and export growth and continued investment by American businesses,” Commerce Secretary John Bryson said. “Despite today’s encouraging numbers, we must do more to create jobs.”

The latest report, which reflects the total value of goods and services produced in the United States, comes as the United States continues recovering from the 2007–2009 global recession and unemployment stays at a rate of 9.1 percent.

“The level of real GDP now exceeds its level at the business-cycle peak in the fourth quarter of 2007,” Abraham said.

Notable strength in the third quarter included business investment, which grew at an annual rate of 16.3 percent, Abraham said. Residential construction increased 2.4 percent, and is up 1.6 percent over the past year, the first positive four-quarter change since 2006 except for a brief period when the home buyer tax credit was active.

Other positive contributions to GDP growth included consumer spending, 1.7 percent; fixed investment, 1.6 percent; and net exports, 0.2 percent.

“We are, nonetheless, at a fragile moment in the world economy, and cannot afford to do anything to undermine our economic recovery,” Abraham said.

Abraham said the fragile recovery is why the president continues to urge the U.S. Congress to pass legislation aimed at expanding employment in the United States through a series of measures.

“Independent economists say it could increase employment by up to 1.9 million, increase growth and lower the unemployment rate,” she said. “This report also underscores the need to put in place a balanced approach to deficit reduction that phases in budget cuts, instills confidence, and allows us to live within our means without shortchanging future growth.”

Senator Bob Casey of Pennsylvania, chairman of the congressional Joint Economic Committee, said the preliminary third-quarter report on the economy is a welcome improvement compared with the “extremely slow growth we had in the first half of the year.”

“Even so, economic growth is not as strong as we would like to see, and it is clear that Washington must focus on passing legislation that will provide businesses with the incentives necessary to add employees and help grow our economy,” Casey said.