U.S. Economy Grows More Than Expected In 3Q

The U.S. gross domestic product rose in the third quarter by 3.5%, the Commerce Department said Thursday, marking the first time in a year that economic activity expanded nationwide, and offering another sign that the recession may be over.

The Commerce Department’s Bureau of Economic Analysis said that its “advance” third quarter GDP reading showed the economy expanded by a seasonally-adjusted 3.5% annualized rate, better than the 3.2% reading that economists had predicted.

Consumer spending was the unexpected driving force behind this quarter’s economic activity, helped by government stimulus programs like “cash for clunkers.”

The expansion could be the unofficial confirmation that this historic recession, which has destroyed trillions of dollars in worldwide wealth and bankrupted iconic companies, ended sometime between June and September of this year.

“What we are seeing in this data is very consistent with the monthly data we have gotten,” said Abby Joseph Cohen, chief economic strategist with Goldman Sachs. “We believe the recession is over, ending sometime during the summer.”

The quarterly gain in GDP was helped by a strong consumer spending component, which rose by 3.4% in the third quarter. That’s compared with a 0.9% drop in the second quarter. The BEA said consumer spending contributed 2.36 percentage points to GDP growth.

While GDP shows that the U.S. economy is mending, much damage has been done; U.S. unemployment remains near 10% and Federal budget deficits have ballooned to $1.4 trillion.

Most economists have said that the recovery out of this recession will be slow and painful, statements that government officials have echoed.

GDP is the broadest gauge of economic activity, measuring the total production of all goods and services in a given period of time. It’s the economic indicator that’s used in part to measure when a country enters and exits a recession.