Figures released by the US Commerce Department show that the US economy grew at an annualised rate of 2.5% – nearly twice the figure for Q2 of 1.3%. The figures imply that demand and growth have picked up in the second half of the year within the US economy.
A closer look at the figures shows that the better performance was buoyed by better consumer and business spending; I was also helped by a narrowing of the balance of trade figures.
Whilst the economy created 103 000 new jobs in September, the total of the workforce unemployed remains stubbornly above the 9% mark where it has languished for five months – in short, about as many jobs are being lost as created, but creating the employment stats has become a job that would tax the likes of Tom Clancy. The bottom line is that the recovery in the US has yet to gather sufficient strength to see significant inroads made into the numbers of unemployed.
The demand for durable goods, such as refrigerators and other white goods was up in the third quarter and this domestic demand helped the data; 70% of US GDP is dependent on domestic demand. Consumer confidence is at its lowest ebb since march 2009. The funding for the increased spending came from savings since income only improved by 0.1% in September. Personal spending was up by 0.6% to $68.7 billion, but savings from income fell to just 3.6% of income on average; the lowest figure since August 2009. Clearly, a spending “boom” fuelled on savings cannot be sustained in the long run. The US economy needs to see stronger growth which will fuel job creation and an increase in disposable income.
On the back of more positive news from Europe after the EU action to put a bottom under the sovereign debt crisis and ensure the survival of exposed banks should the worst come to the worst, it is nice to be able to end a week on a positive note for once.