•  
  • New York 00:26
  • London 04:26
  • Barcelona 05:26
  • Tokyo 13:26
  • Sydney 15:26
  • SignUp | Login

Daily Global Commentary

Recession is History, Economy Back in Business

Thu, Oct 29 2009, 21:58 GMT
by Northern Trust Economic Research Department

Northern Trust  |  View company's profile


Vote:

0

0

Recession is History, Economy Back in Business

The recession is behind us. Real gross domestic product of the U.S. economy grew at an annual rate of 3.5% in the third quarter after a 0.75 drop in the prior quarter. This is the first increase of real GDP after a string of four quarterly declines. Real GDP has declined in five out of the six quarters of the recession.

The Business Cycle Dating Committee of the National Bureau of Economic Research will make the official announcement after it confirms the turning point based on revisions of economic data. This recession is the longest on record in the post-war period and the deepest also. Real GDP has declined 3.8% from the peak in the second quarter of 2008 to the trough in the second quarter of 2009. This is the largest peak-to-trough decline of real GDP in the post-war period (see table 1).

In the third quarter, consumer spending accounted for the largest part of the growth in real GDP, followed by exports, inventories and residential investment expenditures. Of these four components, exports and inventories are most likely to continue to make large contributions in the quarters ahead. Consumer spending is projected to advance in the quarters ahead but at a noticeably slower pace. The surge in auto sales from the “cash for clunkers” program in the third quarter provided the temporary lift to consumer spending.

Residential investment expenditures grew at an annual rate of 23.4% in the third quarter, after a string of fourteen quarterly declines. Third quarter spike is encouraging but it is unclear if the robust pace will remain durable. The $8000 first-time home buyer tax credit program helped boost home sales in addition to low mortgage rates and home prices.

Final sales to domestic purchasers increased at an annual rate of 3.0% in the third quarter. The 2.3% increase in government expenditures is expected to show a more robust gain in the near term, which should show the impact of fiscal spending plan envisaged for 2010. The GDP price indexes suggest that inflation is contained, again underscoring that inflation is not the primary issue at the present time.

Going forward, the lift to the headline GDP number in the third quarter is partly from future auto sales, which implies that consumer spending and GDP growth are most likely to show more muted growth in the fourth quarter of 2009 and first quarter of 2010. The Fed is hold for several months until it is confirmed the unemployment rate has peaked.

Total Continuing Claims are Stabilizing

Initial jobless claims were virtually unchanged at 531,000 during the week ended October 24 from the 530,000 reading of the prior week. Continuing claims, which lag initial claims by one week, fell 148,000 to 5.945 million, marking the fourth consecutive weekly decline. A part of this drop is attributed to the expiry of 26 weeks of eligibility for unemployment insurance.

Upon the completion of 26 weeks, recipients can collect unemployment insurance under the Extended Benefits Program and Emergency Unemployment Compensation Program. Therefore, the true size of recipient of unemployment insurance is a sum total of recipients under these various programs. Data for the special programs lags initial jobless claims data by two weeks. During the week ended October 10, total continuing claims inclusive of seasonally adjusted continuing claims and those under the special programs dropped to 9.84 million from a revised peak of 10 million during the week ended October 3. This decline is noteworthy because it the first positive sign in the labor market after several weeks. We should b able to confirm the improvement as additional data become available.



Legal disclaimer and risk disclosure

The information herein is based on sources which The Northern Trust Company believes to be reliable, but we cannot warrant its accuracy or completeness. Such information is subject to change and is not intended to influence your investment decisions.
Vote:

0

0

Related reports

Continued Economic Recovery, Low Inflation by Wells Fargo Investments, LLC
Fri, Mar 19 2010, 19:58 GMT

Discount rate discussions keeping floor under bonds by Interactive Brokers LLC
Fri, Mar 19 2010, 14:29 GMT

GoldCore Update: Sterling Gold Near Record Highs as Election Looms and Economic Outlook Uncertain by GoldCore
Fri, Mar 19 2010, 14:28 GMT

Political jitters on the rise in EMEA markets by Danske Bank A/S
Fri, Mar 19 2010, 14:13 GMT

Canada: Core CPI above target in February by National Bank of Canada
Fri, Mar 19 2010, 13:19 GMT

employment, indicator, us

[ View All ]

Related content

Indices: FTSE closes with loses, correction
FXstreet.com | Fri, Mar 19 2010, 16:39 GMT

Commodities: Oil collapse follows risk-market reversal
AAP | Fri, Mar 19 2010, 14:49 GMT

Indices: Dow plummets premarket
FXstreet.com | Fri, Mar 19 2010, 14:15 GMT

Forex: USD/CAD hits 20-month high below 1.0070 after retail sales
FXstreet.com | Fri, Mar 19 2010, 12:40 GMT

Canadian retail sales exceed forecasts
FXstreet.com | Fri, Mar 19 2010, 12:38 GMT

employment, indicator, us

[ View All ]

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

©2010 "FXstreet.com. The Forex Market" All Rights Reserved.