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Kimberly Amadeo

The Economy Grew a Healthy 2% in Q3

By October 29, 2012

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The economy returned to a healthy 2-3% growth range in the third quarter. The BEA's advance estimate for GDP growth for July-September was 2%. This was the same as it was in the first quarter (January-March),  and faster than the 1.3% rate for the second quarter (April-June). Why did growth pick up?

The biggest changes were in three categories: durable goods, consumables and government spending.

  1. Durable goods contributed .63%, instead of detracting .02% in Q2. This was thanks to shipments of cars, trucks and RVs.
  2. Clothing and footwear contributed .14%, instead of subtracting .12% as they did in Q2.
  3. Federal government expenditures contributed .72%, instead of detracting .02%. This was primarily due to third quarter increases in defense spending.

Growth would have been even better if it weren't for the eurozone crisis. Exports of goods detracted .35% from GDP, after contributing .67% in Q2. (Source: BEA, GDP Advance Estimate, October 26, 2012)

What It Means to You

Growth is trending in the right direction, but it's still needs a boost to create enough new jobs to significantly lower the unemployment rate. However, government spending which is one of the pillars of GDP, is heading up. The state and local governments are starting to be less of a drag. These are long-term trends that are part of the expansionary phase of the business cycle. As long as Congress doesn't let us fall off the fiscal cliff, the fourth quarter and 2013 should be better.

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