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October 28, 2005
The Opposite Of The "S Word"
I have a confession to make. Somewhere deep down in my 70s-infected soul, I have been dreading the day when the evidence would make an unmistakable move in the direction of declining real economic activity coupled with an acceleration in the inflation trend. It didn't happen today.
The U.S. economy grew at a stronger-than-expected 3.8 percent annual rate in the third quarter, the government reported on Friday, shaking off the drag from two hurricanes and rising energy prices.
"Shaking off" is right, and it is really pretty amazing. So maybe we at least had some bad inflation news?
Nope. From Bloomberg...
The GDP report's personal consumption expenditures index that excludes food and energy, a measure favored by Fed policy makers, rose at a 1.3 percent annual rate, the slowest since the second quarter of 2003.
... and from CNNMoney:
The increase in the Employment Cost Index, a broad gauge of what employers pay in wages and benefits, marked a slight acceleration from the second quarter's 0.7 percent advance, the Labor Department said.
But over the past 12 months, total employment costs have risen just 3.1 percent, the smallest gain in six years, as wages grew only 2.3 percent, the smallest rise on record.
The last bit of news is a mixed blessing, in that the report "also showed workers losing ground to inflation." And if you insist, you can get your fill of dreary economic news by checking out The Skeptical Speculator's summary of the September durable goods orders report. Or the updated consumer sentiment index from the University of Michigan.
All in all, though, it wasn't a bad day.
Kash says the economy is "still cruising along at a reasonable rate."
Mark Thoma notes "the economic news is not unambiguously positive from labor's perspective."
VoluntaryXchange gives the third quarter a B.
William Polley draws attention to the fact that businesses were still drawing down inventories.
Barry Ritholtz reminds us that there will be revisions.
UPDATE: James Hamilton gives the news a thumbs-up, and has a nice picture of the growth in the GDP components. pgl follows-up on Kash's post, and fears that the growth in consumption and government purchases means yet lower saving. The Capital Spectator wonders what it all means for monetary policy. Steve at Deinonychus antirrhopus focuses on the tepid labor compensation growth. pgl follows-up on Kash's post, and fears that the growth in consumption and government purchases means yet lower saving. The Skeptical Speculator does its usual wonderful job of putting things in a global context.
UPDATE 2: The Prudent Investor is not gladdened by the prominent role of government spending.
UPDATE 3: Mike Shedlock tries his hand at headline writing.
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» New GDP data and recession probabilities from Econbrowser
The Bureau of Economic Analysis yesterday released its advance estimates for the third quarter, reporting real GDP grew at an annual rate of 3.8%. [Read More]
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