Economic Notes: A New Year, New Decade, and New Cycle
12/28/2009
By Patrick O'Keefe, Director of Economic Research, J.H. Cohn
The expansion of Gross Domestic Product (GDP) in the third quarter (Q-3) was less robust than originally estimated by the Bureau of Economic Analysis (BEA). With more complete data in hand, BEA pegged growth at 2.2%—down from the initial estimate (+3.5%), but still superior to the prior four quarters of declining activity.
So much for ancient history: Q-4 is nearing its end, bringing down the curtain on a year, a decade, and, it appears, a punishing recession.
As has been pointed out, Q-3’s growth was the product of fiscal and monetary policies and the turning of the inventory cycle. But sustained recovery needs other sectors – most especially consumers (the bulk of final demand) – to join the party. Recent data suggest they have, tentatively.
Personal income and after-tax income both rose for the fifth consecutive month in November. And at least some of those added dollars are being spent. Consumer spending has risen steadily since April, even as households continue to rebuild their balance sheets by saving more.
While a sustained expansion through 2010 is not yet certain, the best bet is that on January 1st we will be celebrating a new year, a new decade, and a new economic cycle.
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