The US economy grew for the first time in a year as an aggressive array of stimulus measures brought an end to the longest period of contraction since the Great Depression.
US gross domestic product grew at an annualised rate of 3.5 per cent in the third quarter after shrinking in each of the past four quarters, Wall Street analysts forecast that the economy would grow by 3.2 per cent.
Boosting growth was an upturn in consumer spending, residential investment and strong government spending. The impact of government stimulus measures succeeded in jolting the economy during the latest quarter, as the soon-to expire first-time home buyer tax credit and the “cash for clunkers” car rebate programme lifted residential investment and chipped away at car inventories.
Consumer spending, which accounts for about 70 per cent of economic activity, rose by 3.4 per cent after rising by only 0.9 per cent in the second quarter, while the surge in car demand lifted durable goods purchases by 22.3 per cent. Personal consumption expenditures added 2.36 percentage points to GDP growth.
The Federal Reserve said that most parts of the US are seeing stabilisation or growth, but that the rebound has remained weak. The Fed pointed to renewed strength in residential real estate and manufacturing but expressed concern about commercial property.
Economists at Goldman Sachs argue that the recovery will be “sluggish” with inflation and interest rates remaining low. They warn that headwinds abound with small companies underperforming, the labour market stretched, state and local budgets cutting back and a persistent excess of housing supply.
Analysts suggest that unemployment, which tends to lag behind during an economic recovery, will continue to be a drag on future growth.