WASHINGTON — Economic growth sped up in the summer, although not to any breakneck speed, according to a new report that reflects both the durability of the U.S. economic recovery and its sluggishness.
The Commerce Department reported Friday that the nation’s gross domestic product grew by 2 percent from July through September. That’s up from the 1.3 percent rate posted in the second quarter and roughly in line with analysts’ forecasts.
The jump was driven by gains in consumer spending, housing investment and an uptick in government spending. But the rate was dragged down in part by falling exports and decreasing investment in commercial buildings.
Conference Board economist Kathy Bostjancic summed it up: “U.S. economic growth is slow, but not slowing.”
Amid the heightened scrutiny of an election season, the latest numbers offer something for both sides to seize on. The U.S. economy has now grown for 13 straight quarters – more than three years consecutively – even as it has been buffeted by a wide range of threats from here and abroad, which President Obama and his allies pointed out Friday morning.
“While we have more work to do, today’s GDP growth report, showing the 13th straight quarter of growth, is more evidence that our economy continues to come back from the worst recession since the Great Depression under President Obama’s leadership,” Obama campaign spokesman Adam Fletcher said in a statement.
“Businesses have added 5.2 million jobs over the past 2 1/2 years, the unemployment rate is now at its lowest levels since January 2009, and the President has a concrete, detailed plan to continue moving America forward, get folks back to work and strengthen the middle class for the future.”
But the growth rate for most of those three years has been slow, roughly in line with the long-term growth potential of the U.S. economy. It’s not enough to put the millions of jobless Americans back to work with any speed, Republican presidential nominee Mitt Romney and his allies emphasized.
“Today we received the latest round of discouraging economic news: Last quarter, our economy grew at only 2 percent, less than half the 4.3 percent rate the White House projected after passing the stimulus bill,” Romney said according to a campaign statement released Friday morning. “Slow economic growth means slow job growth and declining take-home pay. This is what four years of President Obama’s policies have produced.”
GDP is the broadest measure of economic activity, aiming to capture the value of all goods and services produced within U.S. borders. Over time, it is this growth in economic output that determines whether the nation is becoming wealthier or poorer.
By that measure, the new numbers offer a portrait of an American economy in transition. Some sectors are finally showing renewed strength, while previous drivers of the expansion are starting to fade.
On the positive side of the ledger, consumers increased their spending at a 2 percent annual rate, up from 1.5 percent last spring. There was a strong gain in spending on “durable goods,” particularly automobiles and recreational goods (which together accounted for nearly a quarter of overall GDP growth).
The data also showed signs of a comeback in housing, with a 14.4 percent annual rate of gain in residential investment. The housing sector has been in positive territory now for six straight quarters, but it is coming off such a low, depressed base that even double-digit gains do not do much to improve overall growth levels. The sector’s rise in the third quarter translated to a contribution of only 0.33 of a percentage point to the overall economic growth rate.
Government spending spurred growth for the first time in nine quarters, the report showed. The overwhelming cause was a jump in defense spending, at a 13 percent annual rate. Also, state and local government spending, which has been contracting continuously since the start of 2010, was essentially flat (declining at an annual rate of 0.1 percent). Non-defense federal spending rose at only a 3 percent annual pace.
The slowing global economy, particularly in Europe and China, weighed on U.S. trade. Exports fell at a 1.6 percent annual rate after rising every quarter for more than three years. That helped cause the trade balance to actually subtract more than 0.18 of a percentage point from overall economic growth, even though imports also fell.
In one worrisome sign, businesses seem to be holding onto cash and pulling back on capital investment, perhaps out of fear of the slowing global economy and the approaching “fiscal cliff” of tax hikes and automatic spending cuts.
Investment in business structures fell at a 4.4 percent annual rate, while business investment in equipment and software was flat after having risen for 11 consecutive quarters. That result is consistent with a weak report on durable goods orders Thursday.