Good news — GDP grew by an annual rate of 2 percent in the third quarter, up from 1.3 percent in the second quarter.
The U.S. economy expanded more than forecast in the third quarter, paced by a pickup in consumer spending, a rebound in government outlays and gains in residential construction.
Gross domestic product, the value of all goods and services produced, rose at a 2 percent annual rate after climbing 1.3 percent in the prior quarter, Commerce Department figures showed today in Washington. The median forecast of 86 economists surveyed by Bloomberg called for a 1.8 percent gain. [...]
The rate of growth would have been stronger if not for the drought that affected crops in the Midwest. A drop in farm inventories subtracted 0.4 percentage point from third-quarter GDP after cutting 0.2 point in the prior period, the report showed.
Why did the economy do so much better in the third quarter? The housing market is rebounding, consumer spending is up, the auto industry is seeing its best sales in more than four years, household debt is at its lowest level in years, and federal spending has slightly increased.
Why isn’t GDP much higher? Severe drought, austerity at the state and local level, and a lack of action by congress.
The Economic Policy Institute estimated that passing President Obama’s American Jobs Act would increase GPD by as much as 3.3 percent, but it’s hard to pass bills to create jobs when you’re on vacation or chasing shadows, which is what congress has spent most of the last year doing.