America’s economy accelerated third quarter

America’s economy rose at a 2% annual pace in the third quarter, reported the Bureau of Economic Analysis this on October 26. It marks an acceleration from a second quarter in which growth clocked in at just 1.3%.

The acceleration itself is encouraging. So too are some of the sources of that acceleration. Consumers continue to pull their weight, and an 8.5% rate of growth of durable goods consumption in the third quarter suggests that the appetite for big purchases is holding up. Residential investment boomed, rising at a 14.4% annual pace for the quarter. Despite that the sector managed just a 0.33 percentage-point contribution to total growth. The relatively low contribution reflects just how far residential output tumbled during the recession and recovery. Construction should chip in ever more in coming quarters, however, as inventory levels have been plummeting and rents and prices rising.

Government spending and investment also helped output along in the third quarter. The biggest contribution came from a rise in federal defense outlays.

There is also some cause for concern in the report, however, which seems to reflect the slowdown in industrial activity related to global economic weakness. The contribution of investment to growth sank for a second consecutive quarter, and net trade was a drag on output as exports fell by more than imports. Where industrial recovery and trade helped compensate for domestic economic weakness early in the recovery, they now seem to be preventing domestic resilience from adding more to output.

There is good reason to expect continued acceleration into the fourth quarter. A recovering housing sector should continue to raise household confidence. But beyond that, the outlook grows more cloudy. A raft of spending cuts and tax rises—the fiscal cliff—looms at year's end. If Congress is unable to prevent some of the expiring measures from hitting, the fiscal blow could harm two of the sectors most responsible for this quarter's decent performance: personal consumption and government spending and investment.

U.S. Economic Growth Slows to 1.5% in Q2

 

The latest government statistics showed that the United States economy expanded by a simply 1.5 percent annual rate in the second quarter. It has lost the momentum it appeared to be building earlier this year. The government also provided on Friday a revised figure for first-quarter G.D.P., saying the economy then grew by a 2 percent annual rate. The previous estimate was 1.9 percent.

The economic growth, as measured by the gross domestic product, lagged as consumers curbed new spending and businesses held back. Consumers increased their savings rate, a sign of increased uncertainty about the future. Several bright spots in the first three months of the year, including auto production, computer sales and large purchases like appliances and televisions, dimmed or faded away altogether in the second quarter, and government at all levels continued to cut spending. Growth was not strong enough to drive down the unemployment rate, which has stalled above 8 percent in recent months.

Exports accelerated in the second quarter despite more recent signs of diminishing demand, but the gain was canceled out by a larger increase in imports, which count against the gross domestic product. Economists expect exports to shrink as the dollar rises against other currencies, making American goods less competitive.

The housing sector, which has gone from a drag on the economy to a positive, continued to grow, posting a 9.7 percent gain, though it is less than half its rate of growth in the first quarter.

Inflation, a measure watched closely by the Federal Reserve as it determines whether to take further action, slowed as well, with consumer prices growing only 0.7 percent compared with 2.5 percent in the first quarter.

The Commerce Department also released updated estimates of economic activity for 2009, 2010 and 2011. Those figures showed that the recession was less severe than it seemed in the most recent reports. The new estimates show that economic activity fell by 3.1 percent in 2009 and then rose by 2.4 percent in 2010. Last summer, the government reported that activity fell by 3.5 percent in 2009 before rising 3 percent in 2010. The estimated pace of growth in 2011, 1.8 percent, remained basically unchanged. It was previously reported as 1.7 percent.

The agency now estimates average annual growth of 0.3 percent over the three-year period, rather than 0.4 percent.

Operation Twist Extension: Latest Round of Monetary Easing

The Federal Reserve on June 20th it announced its seventh installment of unconventional monetary policy since running out of orthodox ammunition in late 2008, when short-term interest rates fell, in effect, to zero. It would purchase $267 billion of long-term bonds by the end of the year, paid for from the proceeds of sales of short-term bonds already in its portfolio.

The move extends a program, called Operation Twist (because it "twists" the slope of the yield curve on bonds) . To lower long-term interest rates down in the hope of stimulating demand, the Fed announced Operation Twist program last autumn and due to expire this month, under which the Fed has swapped $400 billion of short-term bonds for long-term ones. Previous initiatives have included purchasing bonds with newly created money (“quantitative easing”, or QE), reinvesting the proceeds of maturing bonds, and verbally committing to keeping rates near zero for ever longer periods.

This latest round of monetary easing, like its predecessors,  was motivated by the economy’s failure to grow as quickly as the Fed had forecast. Members of the Federal Open Market Committee (FOMC), the Fed’s main policymaking body, now expect growth of between 1.9% and 2.4% this year, down sharply from their April forecast of growth between 2.4% and 2.9%.

Fed considers Sterilized Bond Buying to boost economy

The Federal Reserve is considering a new type of bond-buying program designed boost the economy in the months ahead while curbing future inflation, according the Wall Street Journal.

Federal Reserve officials have used different types of bond-buying programs since 2008. All of them are aimed to drive down long-term interest rates to spur investment and spending by businesses and households. Now they're exploring three different approaches, which are:

1. The Fed could use the method they used aggressively from 2008 into 2011, in which the Fed effectively printed money and used it to purchase Treasury securities and mortgage debt. The Fed has already acquired more than $2.3 trillion of securities in several rounds of purchases using this approach, widely known as "quantitative easing," or QE.
2. They could reprise a program launched last year in which it is selling short-term Treasury securities and using the proceeds to buy long-term bonds. This $400 billion program, known as "Operation Twist," allows the Fed to buy bonds without creating new money.
3. In the new novel approach, the Fed could print money to buy long-term bonds, but restrict how investors and banks use that money by employing new market tools they have designed to better manage cash sloshing around in the financial system. This is known as "sterilized" QE.

U.S. economy grew faster in fourth quarter 2011

The U.S. economy growth in fourth quarter 2011 was stronger than originally thought as consumers increased their spending and businesses stocked up their inventories.

Gross domestic product (GDP), the broadest measure of the nation's economy, grew at a 3% annual rate in the last quarter of 2011, the Commerce Department reported Wednesday. The government had initially reported the economy grew at a 2.8% rate, and economists had projected the GDP growth would be revised down to 2.7% from the initial reading.

That's the fastest growth since the second quarter of 2010 and a major improvement from a 1.8% growth rate in the prior quarter.

Consumer spending picked up at an annual rate of 2.1% in the fourth quarter, slightly higher than originally reported. Spending on durable goods, especially motor vehicles, helped drive GDP higher, as did increased spending at restaurants and hotels.

Meanwhile, businesses increased their inventories by $54.3 billion, after cutting back on their stock the prior two quarters.

Rising European Debts

The debts of the European Union (E.U.) countries have been rising to dangerously high in the past decade causing the current Europe's debt crisis. Greece and Italy have had high levels of debt since 2000, according to Smartinmoney.com. Now more than a half of the E.U. countries carry debts exceed the European Commission limit, which is 60 percent of gross domestic product (GDP).

Greece’s debt problems are not new. The country had high debt as percentage of GDP, even as it prepared to join the euro zone in 2000. Italy and Belgium have long wrestled too with large debt loads. The debt-to-GDP ratios of Greece and Italy have been dangerously high, which are 109% and 103% respectively, since 2000.

Greece In Default

~ Smartmoney.com ~ Ratings agency Standard & Poor's (S&P's) cut Greece's long-term credit rating on Monday to selective default from already junk-level CC category. It is a result of debt write-off deal with private creditors that is part of a second EU bailout of the country.

The rating firm says their move was triggered by the terms Greece put in the tentative deal agreed last Tuesday, which amounts to a 53.5 percent write-down. Following the February 21 debt deal, Greece amends its sovereign bond documentation with collective action clauses (CACs). Greece has been seeking to avoid an outright default on its massive debt by negotiating a "voluntary" debt exchange with creditors.

A CAC binds all bondholders of a certain series to amended payment terms in the event that a certain quorum of creditors has agreed to the terms, S&P explained. If a large majority of creditors accept the new terms then all the creditors need to agree, which would have consequences for bondholders.

Preliminary estimate: U.S. GDP grows 2.8% in fourth quarter 2011

U.S. Economic Recovery Slowly Gained Momentum in Late 2011

Preliminary government estimates that the U.S. economy grew 2.8% in the final three months of 2011, propelled by increases in consumer spending and business inventories. The pace of growth was faster than in the third quarter, when gross domestic product expanded at an annual rate of 1.8 percent.

The increase in gross domestic product was the fastest in a year and a half. Even so, the figure was below the average speed of economic expansion in the United States since World War II.

The 2.8 percent rate is likely to be seen as something of a relief, given many economists were predicting the country would soon dip back into recession.

Inventory spending surged to an estimated $56 billion after a $2 billion decline in the third quarter, the Commerce Department reported. Consumer spending rose 2.0%, compared to 1.7% in the third quarter. Exports climbed 4.7% while imports rose 4.4%. Real final sales in the U.S., which exclude imports and inventories, rose just 0.9% after a 2.7% increase in the third quarter.

One of the biggest drags on growth in the last quarter was government spending cuts at the federal, state and local levels, according to the Commerce Department report. Strapped state and local governments are likely to continue cutting back in 2012, as they have done nearly every quarter for the last several years.

Fed Signals To Keep Rates Near Zero Through Late 2014

The Federal Reserve, declaring that the economy would need help for years to come, said Wednesday it would extend by 18 months the period that it plans to hold down interest rates in an effort to stimulate growth.

The Fed planned to keep short-term interest rates near zero until late 2014, continuing the transformation of a policy that began in the winter of 2008 into a six-year campaign to increase spending.

Map of S&P downgraded ratings for 9 European countries

Standard & Poor's decision to strip France of its AAA credit rating and downgrade eight other Euro zone countries slammed a continent struggling with a debt crisis and an economic slowdown.

Here is the map of countries affected by the S&P ratings downgraded on Jan. 13. The downgraded ratings range from AA+ for France & Austria to BB for Portugal.

Standard and Poor's Credit Rating Downgraded for 9 Euro Zone Countries on Jan. 13

U.S Economic Indicators 3Q 2011

The U.S. economy grew more slowly in the summer than previously thought because consumers spent less than the government had first estimated. The Commerce Department says the economy grew at an annual rate of 1.8 percent in the July-September quarter. That was the fastest growth this year, up from 1.3 percent in the April-June quarter. But it was down slightly from last month's estimate that the economy was expanding at a 2 percent rate in the summer.

But economists expect growth in the current October-December quarter to be stronger. They think the economy is growing at an annual rate of more than 3 percent in the final three months of this year. That would be the fastest pace since a 3.8 percent performance in the spring of 2010.

Fed decision hailed by investors, criticized by emerging markets

The U.S. stock markets surged to two-year high Thursday, Nov. 4, a day after the Federal Reserve’s decision to buy more government securities to stimulate the economy. the Dow was up 1.96 percent, at 11,437.84, while the Standard & Poor’s 500-stock index rose 1.93 percent, to 1,221.06.

Wednesday’s reaction to the Fed announcement was muted, although it was enough to send the Dow up 26.41 points on Wednesday to its highest close in two years. On Thursday, as investors absorbed the impact of the announcement, financial markets in Europe and Asia rose, and the dollar weakened.

U.S. Recession Officially Ended in June 2009

The recession officially ended in June 2009, according to the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), a group charged with determining when recessions officially begin and end.

This official end date makes the most recent downturn the longest since World War II. This recent recession, having begun in December 2007, lasted 18 months. Until now the longest postwar recessions were those of 1973-5 and 1981-2, which each lasted 16 months. Read full article at SmartInMoney.com

Widely Followed Economic Indicators

Major economic indicators that are widely followed by investors include gross domestic product (GDP), consumer price index (CPI), and unemployment rate, according SmartInMoney.com.


Gross Domestic Product: Gauging the economic health

Gross domestic product, commonly referred to as GDP, is commonly used as an indicator of the economic health of a country, as well as to gauge a country's standard of living. GDP measures the overall value of the goods and services produced by the U.S. economy in a specific time period; and is often thought of as the most important economic indicator. GDP is made up of several factors, including public consumption or consumer spending; business investment; federal, state, and local government spending; and net exports (exports less imports).

U.S. Economy Expanded at a 3.2% in First Quarter

The U.S. economy continued to grow in the first quarter. National output expanded at a seasonally adjusted annual rate of 3.2 percent last quarter, after growing 5.6 percent in the fourth quarter of 2009. This marked the third quarter in a row the economy showed strong economic growth. Economists are optimistic that the news may breed more confidence about the future turnaround.

Increased consumer spending played a significant role in the last quarter expansion. Consumer spending grew at 3.6 percent annual rate in the first part of the year, after growing at 1.6 percent annual rate in the previous three months.

Revised GDP showed faster growth in Q4 2009

The economy grew at a faster pace than initially thought at the end of 2009. It grew at a 5.9% annual rate in Q4, up from the Commerce Department's initial reading of 5.7% and the fastest pace in six years.

The better-than-expected Q4 growth figure came as companies cut inventories at a slower pace, accounting for 3.9 percentage points of the 5.9% growth figure. Business investment also rose at a much faster pace than initially reported. However, consumer spending, which accounts for about 70% of economic activity, remained weak.

For all of 2009, the economy shrank 2.4%, the most since 1946

Meanwhile, sales of existing homes unexpectedly plunged 7.2% in January to an annual rate of 5.05 million units, a seven-month low, following December's record 16.2% plunge.

Economy expanded 5.7 percent in 4Q, the fastest in past 6 years

U.S. broadest measure of economic activity, gross domestic product, expanded at an annual rate of 5.7 percent in the fourth quarter, after a 2.2 percent increase the previous quarter. The growth rate was the fastest since the third quarter of 2003, when the economy grew at a rate of 6.9 percent.

Even though the fourth-quarter surge, the economy finished 2009 with its biggest contraction since 1946, when the country was still cooling off from World War II.

The single biggest factor in the strong growth rate last quarter was not consumers buying more, but businesses letting their stockpiles shrink at a slower rate than they had been previously.

As long as the labor market remains weak, consumers will be reluctant to spend money. That means businesses will need to look for other sources of demand, like exports. On net, the economy lost 208,000 nonfarm payroll jobs last quarter, and the unemployment rate rose to 10 percent, from 9.7 percent.

The nation’s output number can be subject to major revisions, especially when the economy is at a turning point. The annual growth rate initially reported by the government for the third quarter of 2009 was 3.5 percent, but was later revised to 2.2 percent. The government’s final tally of last quarter’s output will be released in March.

U.S. 3Q GDP revised down

The U.S. economy grew at the fastest pace in two years during the third quarter, but the revised annual growth rate of 2.2% was much slower than initially reported, the Commerce Department estimated Tuesday. The revisions to third-quarter GDP were in three major areas: Business investment, consumer spending, and inventories.

U.S. real gross domestic product increased for the first time since the spring of 2008, boosted by higher consumer spending, a rebound in investments in homes, a slower pace of inventory reduction, more exports, and robust government spending.

Third-Quarter U.S. Economic Growth Revised Lower

The U.S. economy grew at slower pace in the third quarter than initially reported as weak consumer spending and rising imports softened the effect of stimulus efforts. The revised numbers suggested that growth going forward would be slow.

The nation’s gross domestic product rose at an annual rate of 2.8 percent in the third quarter, compared with a contraction of 0.7% in the prior quarter, the Commerce Department reported Tuesday. The revised GDP falls short of the 3.5 percent originally estimated last month. Compared with a year ago, real GDP is down 2.5%.

Even though growth was slower, the third quarter probably marked the end of the longest recession since World War II, with the economy expanding for the first time in a year. The report does not mark the official end of the recession, though. That determination will be made by the National Bureau of Economic Research, likely sometime in 2010 once all the various economic readings have had their final revisions.

Much of the growth can be attributed to the billions of dollars the federal government has pumped into the economy as it seeks to mitigate the effects of a deep recession. But the nation is still grappling with the highest unemployment rate in 26 years, hampering efforts to persuade consumers to open their wallets again.

Consumer spending in the third quarter increased 2.9 percent, falling short of the 3.4 percent it reported last month. Economists said it was below healthy margins and lower than the levels seen in 1983, when unemployment was equally high. Consumer spending makes up about 70 percent of the economy. Households continue to struggle with damage balance sheets and lingering labor market weakness.


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U.S. GDP finally expanded in third quarter

The United States GDP grew in the third quarter ended in September, the first time its economy has expanded in more than a year. The economy expanded at a 3.5% seasonally adjusted annual rate, ending the longest contraction since World War II.

The economy had been falling for four straight quarters, bottoming with a 6.4 percent decline in the first three months of this year, the steepest quarterly fall since 1982. The expansion matched the economy’s average annual growth rate from the last 80 years

The growth was driven by consumer spending, which rose 3.4% in the third quarter. Some of the largest components of growth, for instance, came from spending on car sales and house building, both areas that have been propped up by federal programs.

The recovery is expected to be slow and painful, as companies shed jobs and credit remains tight. Job-seekers probably will not see the benefits of a recovery for months to come.

The stock market surged in reaction to the news, a bigger-than-expected expansion in the U.S. economy. Stocks posted their biggest gain in more than two months Thursday. The Dow finished up 199.89 points, or 2.05%, to 9962.58, its largest one-day point gain since July 15, when it surged 257 points.

The Standard & Poor's 500 rose 2.25% to 1066.11, with gains in all its sectors, led by a 4.3% jump in financials and a 3.2% rise in its materials category.