A great deal of economic data has been released in the past couple of weeks. The most important news was a report from the Commerce Department indicating that the GDP of the U.S. grew at a rate of 3.5% during the third quarter of this year. Thus far in 2014, the growth rate for the three quarters has now averaged 3.5%.
As I indicated at the beginning of the year, my expectation was a growth rate in excess of 3% for the year, at a time when many economists were suggesting we would do well with a 2.5% growth rate. Now many economists are saying that they think the fourth quarter will not match up and we will see a downturn in the economy. This rate of growth didn’t just happen! In addition to the employment growth of non-farm businesses, the U.S. Government, state and city jobs increased in the third quarter. Job growth appears to be continuing. Consumer spending is up 2.3% over the previous year. Because the consumer represents about 66% of the economy, this is important news. Mortgage interest rates have moved back down from about 4.25% to 4%, helping to move new home construction up 1.8%.
When examining the economy, it is often important to look at some unusual statistics. During this past quarter, real final sales, a measurement of GDP that excludes changes to inventories, expanded at a 4.2% pace, the largest since 2006. Finally, inflation-adjusted GDP grew by 2.3%. What all of this is indicating to me is that inflation is under control, job creation is strong, the consumer is buying, and the U.S. appears to be the financial world leader. Personally, I think the economy could grow by at least 3.5% this quarter. For a fully developed nation, our growth rate is the envy of the rest of the world!
Posted November 18, 2014 at 10:25AM