What You Need To Know About the Economy (In 300 Words)

The most important economic figure of the month, Gross Domestic Product (GDP) was released this morning, spurring a modest rally on the heels of yesterday’s surge.

Of course, everyone is talking about the headline growth rate, which came in at 2.7% this time. This is the best quarterly gain in nearly three years. By comparison, the economy grew at less than half that pace in the second quarter—1.3%. This also is significantly higher than the last third-quarter estimate of 2% growth, but it did just miss the 2.8% consensus estimate.

In the third quarter, the main drivers of growth were consumer spending, private investment as well as exports. Interestingly enough, federal government spending also aided growth while spending at the state and local levels depressed growth.

This report also revealed some interesting consumer trends. In the third quarter, consumers starting vamping up computer buying but curtailed their car and truck purchases. And I’d also like to point out that despite an overall disappointing third-quarter earnings season, after-tax corporate profits still rose 3.3% last quarter—compared with 2.2% in the second quarter. All-in-all, it is clear that the private sector accounts for the lion’s share of economic growth.

Looking ahead to the fourth quarter, there will be challenges—most notably the lingering effects of superstorm Sandy. Additionally, ongoing concerns about the Fiscal Cliff could very well weigh on growth this quarter. But as I’ve mentioned time and time again, I expect holiday sales to do their part in promoting growth.

Today also brought good news from the jobs front: Jobless claims plunged 23,000 to 393,000. This is the first time since Hurricane Sandy that claims have dipped below the 400,000 benchmark (signaling job growth). So it’s clear that the economy is getting back on track after the devastating storm. In any event, we’ll be able to assess the full impact of Sandy once we receive the November unemployment rate next Friday, December 7.


Louis Navellier

Louis Navellier

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