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U.S. economic growth shows only slight improvement

Associated Press
October 26, 2012
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The U.S. economy grew at a slightly faster 2-percent annual rate from July through September, according to preliminary estimates, buoyed by more spending by consumers and the federal government.

Growth accelerated from the 1.3-percent rate in the April-June quarter, the Commerce Department said Friday. Even with the increase, growth remains too weak to rapidly boost hiring. Historically, from 1947 until 2012, the quarterly rate averaged 3.25 percent.

The incomplete report, which is subject to future revisions, is the last snapshot of the economy before Americans choose a president in 11 days.

Republican nominee Mitt Romney has criticized President Barack Obama's handling of the economy and has noted that the pace of growth has slowed from last year. The 1.74-percent annual growth rate for the first nine months of 2012 remains slightly behind last year's 1.8-percent growth.

Still, the pickup in growth could lend weight to Obama's message that the economy is improving.

"Growth came in a little higher than we had feared, largely because of the big jump in federal spending," said Paul Ashworth, chief U.S. economist at Capital Economics. "But the economy is still not growing rapidly enough to create sufficient jobs to reduce the unemployment rate."

The economy grew faster last quarter in part because consumer spending rose at a 2-percent annual rate, up from a 1.5-percent rate in the second quarter. Spending on homebuilding and renovations increased at an annual rate of more than 14 percent.

And federal spending surged, mainly because of the sharpest increase in defense spending in more than three years.

Growth was held back by the first drop in exports in more than three years and flat business investment in equipment and software.

The economy was also slowed by the effects of the severe drought that struck last summer in the Midwest. The drought cut agriculture stockpiles and reduced the annual growth rate by nearly a half-point. Once crop supplies return to normal, they will help boost economic growth, analysts noted.

The government's report covers gross domestic product. GDP measures the nation's total output of goods and services — from restaurant meals and haircuts to airplanes, appliances and highways.

It was the government's first of three estimates of growth for the July-September quarter. And it sketched a picture that's been familiar all year: The economy is growing at a tepid rate, slowed by high unemployment and corporate anxiety over an unresolved budget crisis and a slowing global economy.

The Bureau of Economic Analysis said the first estimate was based on incomplete data and could be revised upward or downward. The second estimate will be released Nov. 29. Growth rates from first estimates in the previous two quarters have been revised downward on further estimates.

It is unclear what effect, if any, Friday's report might have on the presidential race. Some analysts said they doubted it would sway many undecided voters in battleground states.

University of Michigan economist Justin Wolfers tweeted that it was ridiculous to "judge a presidency on one mildly positive yet-to-be-revised backward-looking quarterly datapoint."

The factors supporting the economy's growth are shifting. Exports and business investment drove much of the growth after the Great Recession officially ended in June 2009. But those sectors are weakening. Consumer spending, meantime, has picked up. And housing is adding to growth after a six-year slump.

Consumer spending drives nearly 70 percent of economic activity.

Businesses have grown more cautious since spring, in part because customer demand has remained modest and exports have declined as the global economy has slowed.

Many companies worry that their overseas sales could dampen further if recession spreads throughout Europe and growth slows further in China, India and other developing countries. Businesses also fear the tax increases and government spending cuts that will kick in next year if Congress doesn't reach a budget deal.

Since the recovery began more than three years ago, the U.S. economy has grown at the slowest rate of any recovery in the post-World War II period. And economists think growth will remain sluggish at least through the first half of 2013.

Some analysts believe the economy will start to pick up in the second half of next year.

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  • Imagine if..
    the Republicans had been willing to work the President to pass his jobs bill...we might growing at 3% - 4%...but alas they crave power more than actually addressing or solving problems. Remember that when you go to the polls.

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  1. A Tilted Kilt at a water park themed hotel? Who planned that one? I guess the Dad's need something to do while the kids are on the water slides.

  2. Don't come down on the fair for offering drinks. This is a craft and certainly one that belongs in agriculture due to ingredients. And for those worrying about how much you can drink. I'm sure it's more to do with liability than anything else. They don't want people suing for being over served. If you want a buzz, do a little pre-drinking before you go.

  3. I don't drink but go into this "controlled area" so my friend can drink. They have their 3 drink limit and then I give my friend my 3 drink limit. How is the fair going to control this very likely situation????

  4. I feel the conditions of the alcohol sales are a bit heavy handed, but you need to realize this is the first year in quite some time that beer & wine will be sold at the fair. They're starting off slowly to get a gauge on how it will perform this year - I would assume if everything goes fine that they relax some of the limits in the next year or couple of years. That said, I think requiring the consumption of alcohol to only occur in the beer tent is a bit much. That is going to be an awkward situation for those with minors - "Honey, I'm getting a beer... Ok, sure go ahead... Alright see you in just a min- half an hour."

  5. This might be an effort on the part of the State Fair Board to manage the risk until they get a better feel for it. However, the blanket notion that alcohol should not be served at "family oriented" events is perhaps an oversimplification. and not too realistic. For 15 years, I was a volunteer at the Indianapolis Air Show, which was as family oriented an event as it gets. We sold beer donated by Monarch Beverage Company and served by licensed and trained employees of United Package Liquors who were unpaid volunteers. And where did that money go? To central Indiana children's charities, including Riley Hospital for Children! It's all about managing the risk.

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