The U.S. economy continues its sluggish crawl, as reported by the BEA. The agency revised its estimate for third quarter (July-September) GDP growth even lower, to 1.8%. This is less than the 2% second estimate, and the 2.4% advance estimate. This latest revision was because personal consumption expenditures were lower than originally thought. For more on how the BEA reports U.S. Gross Domestic Product, see the article entitled "GDP Current Statistics".
Although growth is slow, the economy is still in the expansion phase of the business cycle. That's because total economic output in the third quarter was just over $15 trillion, the highest ever. Yes, that's right -- the economy is producing more than the previous record of $14.4 trillion, set in the second quarter of 2008. The economy beat that record in the second quarter of 2010.
So, if the economy is producing more than ever, why hasn't the Dow beat its record of 14,047 set in in October 2007? Because the economy is still not growing at a healthy rate, which is between 2-4%. It needs to grow that fast (even faster, really) to put everyone back to work.
What It Means to You
You can't do anything about the rate of economic growth, but you can at least profit from the areas of the economy that are growing. Two categories that took off last quarter were:
- Non-residential structures, like office buildings, grew 14%.
- Equipment and computers grew 16%.
The economy is being held back by cutbacks in non-defense Federal spending, as well as state and local government spending.For these reasons, expect economic growth to remain sluggish, between 2-3%, for a while.
- What is the Ideal GDP Growth Rate?
- What Is the Expansion Stage of the Business Cycle
- Components of GDP
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