Oct. 29 (Bloomberg) — The U.S. economy grew in the third quarter for the first time in more than year, propelled by stimulus-driven gains in consumer spending and home building.
The world’s largest economy expanded at a 3.5 percent pace from July through September, exceeding the median estimate of economists surveyed by Bloomberg News, after shrinking the previous four quarters, figures from the Commerce Department showed today in Washington. Household purchases climbed 3.4 percent, the most in more than two years.
Policy makers will now focus on whether the recovery, supported by federal assistance to the housing and auto industries, can be sustained into 2010 and generate jobs. The record $1.4 trillion budget deficit limits President Barack Obama’s options for more aid, while Federal Reserve officials try to convince investors that the central bank will exit emergency programs in time to prevent a pickup in inflation.
“A lot of this is thanks to government support,” Kathleen Stephansen, chief economist at Aladdin Capital Holdings LLC in Stamford, Connecticut, said in an interview on Bloomberg Television. “We still have major headwinds for the consumer. That worries me. The consumer, in fact private demand in general, is not ready yet to pick up the growth baton from the government.”
Stock-index futures jumped after the better-than- anticipated reading on growth. The contract on the Standard & Poor’s 500 Index was up 1 percent to 1,048.8 at 9:03 a.m. in New York. Treasury securities fell.
Jobless Claims
A report from the Labor Department showed 530,000 workers filed claims for jobless benefits last week, more than anticipated and signaling the job market is slow to heal even as growth picks up.
The economy was forecast to grow at a 3.2 percent annual pace, according to the median estimate of 79 economists surveyed by Bloomberg News. Estimates ranged from gains of 2 percent to 4.8 percent.
The economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades. The four consecutive decreases through the second quarter marks the longest stretch of declines since quarterly records began in 1947.
The gain in consumer spending, which accounts for about 70 percent of the economy, “largely reflected” an increase in purchases of automobiles attributable to the administration’s “cash-for-clunkers” plan, the report said. The 22 percent jump in purchases of durable goods, which includes autos, was the biggest since 2001. Total purchases were forecast to climb 3.1 percent, according to the survey median.
Excluding Autos
Excluding the influence of auto sales, production and inventories, the economy grew 1.9 percent last quarter.
While most economists estimate the recession has ended, an official pronouncement will take many months to materialize. The National Bureau of Economic Research, based in Cambridge, Massachusetts, is responsible for determining when contractions begin and end. Robert Hall, head of the committee charged with making the call, said in August it may take more than a year for the group to reach a conclusion.
Residential construction jumped at a 23 percent annual rate last quarter, the first gain in almost four years and the biggest since 1986. The rebound added 0.5 percentage point to growth.
Homebuilding rebounded as sales climbed, propelled in part by an $8,000 tax credit for first-time buyers and Fed purchases of mortgage-backed securities that helped lower borrowing costs.
To Continue Reading: (Bloomberg) Reporter on this story: Timothy R. Homan
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