By Leigh Howe
Are we seeing signs of an economic recovery? We’ve heard quiet rumblings from the analysts that are becoming stronger. Here’s a look at the latest economic indicators and some of the analysts’ comments.
Real GDP growth. The economy – the output of goods and services produced by labor and property located in the United States — grew at a 7.2% annual rate in the third quarter this year. This was after growth of 3.3% in the second quarter this year. The major contributors to the increase in real GDP in the third quarter were personal consumption expenditures (PCE), equipment and software, residential fixed investment, and exports.
Business investment. Among the most impressive factors: Business investment grew at an 11.1% rate last quarter. Automobile production fueled much of the recent gain in factory output, though there is doubt that that it will be sustained from the automobile sector. Many manufacturers are still facing overcapacity issues. A study conducted by Fleet Capital Corp shows that 74% of the companies surveyed expect the nation’s economy to expand in 2004 – with most of the growth coming from the service sector. This is the most optimistic response they have gotten in the six-year history of the study. Manufacturers are even more optimistic than the recent past – the Institute for Supply Management monthly index of manufacturing business conditions rose to an expansionary reading of 57.0 in October, the highest reading since January 2000.
What about jobs? Growth in GDP, reduction in inventories and strong corporate profits could finally spur job growth, but the forecasts for employment and job growth are mixed. The United State Conference of Mayors released a report that supports the recent growth in the U.S. economy but with lower paying jobs. The forecast average wage of new jobs created in 2004 and 2005 is $35,885, while the average wage of jobs lost from 2001 to 2003 was 18% higher at $43,629. The top sectors of job growth are expected to be administration and support; health care and social assistance; and accommodations and food.
2004. While the third quarter GDP growth rate probably won’t be maintained in coming months, many economists say it is now clear the recovery is taking hold. Most analysts are predicting growth to stabilize somewhere around 4% going forward into 2004.
Sources: Wall Street Journal, American City Business Journals, and the Bureau of Economic Analysis.