The Bureau of Economic Analysis’s (BEA) first estimate of economic growth for the third quarter of this year shows an economy that continues to grow at a plodding pace.
According to BEA, the economy grew at 2.8 percent from July 1 through September 30. This was slightly faster than the 2.5 percent the economy grew in in the second quarter of the year.
The main driver of growth in the third quarter was increased investment, the strongest component of which was a sharp climb in business inventories. Inventory accumulation could mean either that businesses didn’t sell as much as they anticipated during the third quarter or that they ramped up production in anticipation of a busy fourth quarter. Time will tell which.
Personal consumption was also a large contributor to growth. Purchases of durable goods—such as cars and home furnishings—drove the growth in consumption.
This is BEA’s first estimate of growth in the third quarter, and subsequent estimates will change.
Updated estimates won’t change the fact that growth continues to be too slow. Compared to previous recoveries from steep recessions, it is clear growth should be much more robust at this point. For instance, after a comparable period following the steep 1981–1982 recession, growth averaged 3.5 percent annually. And that was after periods of growth that were three times stronger than what we’ve seen since the last recession ended.
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