Economic growth in the United States picked up modestly in the third quarter, the Commerce Department said Thursday, and economists generally expect that it will continue at nearly the same pace through the end of the year.þþTotal output grew at an annual rate of 2.5 percent from July to September, almost double the 1.3 percent rate in the second quarter, the department reported.þþThe growth, however, is still paltry — not brisk enough to recover the ground lost in the economic bust, lower unemployment or even dispel fears of a second recession. But the report offered a small helping of reassurance.þþ“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.”þþThe consensus forecast of economists for the fourth quarter is a 2 percent growth rate. Still, the economy is full of mixed signals. Real income is declining, but so is the number of people filing for unemployment. The stock market has rallied but consumer confidence has plummeted to levels last seen in 2008.þþAnd the economy may be growing, but Americans cannot feel it.þþ“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.þþThe gross domestic product report showed an uptick in consumer spending, fueled by purchases of durable goods like large appliances, and a larger increase in businesses investing in construction, equipment and software.þþSome of the shocks that rattled the economy at the beginning of the year, like a spike in gasoline prices and the earthquake in Japan, which disrupted the global supply chain, were fading away, 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.þþ“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.”þþOn 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.þþMore pessimistic economists fear that the third-quarter growth will be unsustainable because incomes are not growing, housing values are stalled and consumer spending accounts for more than 70 percent of the gross domestic product. Some of the increase in 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.þþ“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 economic indicators. The negative outlook was beginning to spread to businesses, Ms. Bostjancic said.þþ“C.E.O. confidence is starting to melt away, along with consumer confidence levels, which have always been low,” she said.
Source: NY Times
