Author: Bonnie Queen
Third quarter GDP was announced yesterday, and the U.S. grew at an annualized rate of 3.5 percent. This number will be revised twice — once in November and once in December, but it is good news for the economy. Growth is becoming more reliable; in four out of the five past quarters, GDP has increased by 3.5 percent or more. The Fed seems to agree that the recovery is at least strong enough to warrant the end of quantitative easing, announced on Wednesday.
The increase in real GDP in the third quarter was driven by an increase in defense spending and a shrinking trade deficit. Defense spending rose 16 percent, while exports increased 7.8 percent and imports fell 1.7 percent. Defense spending is of particular interest to North Carolina, where roughly $48 billion, or 10 percent of state GDP, is supported by the military. Consumer spending — which accounts for roughly two-thirds of total U.S. GDP — increased by 1.8 percent, a decline from the 2.5 percent increase seen in the second quarter. Corresponding state GDP data has a significant time lag; 2014 data won’t be released until June. However, North Carolina tracks U.S. GDP very closely.
As a result, we can infer that this latest increase in GDP is likely happening right here at home as well. It’s unclear what will happen in the fourth quarter — especially in regard to consumer spending during the holiday season, but the current expansion seems to be growing more and more stable. In the face of a global slowdown in Europe and China, it appears that the U.S. is leading the global economic recovery.