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U.S. Economy Sees 2.5% Growth Last Quarter

U.S. Economy Sees 2.5% Growth Last Quarter

Recent statistics show that consumers spent almost three times as much during the third quarter of the year, which covers July through to September, than they did in the second quarter of 2011.

The report published by the U.S. Department of Commerce said that this spending increase has helped to drive a 2.5% rate of growth for the economy. When coupled with new reports of an agreement to take action on the European debt problem, many economists felt that their assurances that the United States is not sliding back into recession had been vindicated.

However, it is important to note that just because consumers are spending more money, that does not mean that they are making up for it with their income. In fact, statistics show that personal income has only increased by around 0.1 percent.

When adjusted to reflect inflation, the average amount of disposable income fell for the third consecutive month. This means that since consumers are actually earning less, this increased spending comes at the expense of savings, which dropped to 3.6 percent during the third quarter. This is the lowest rate for savings since the start of the recession in December 2007.

The statistics show that consumer spending accounted for $57 billion, or about 70 percent, of the third quarter’s rapid domestic growth of $81 billion. The largest amount was spent on recreational goods and vehicles. However, auto sales remained at a plateau, but this is still much better than the decreases the industry has seen in recent months.

Gasoline and energy purchases also remained at the same level, but again this is good news following recent declines in that area. Household spending increased a great deal, with health care services leading the way. Services in general saw a boost in consumer spending with nearly every major sub-component in the service seeing spending increases this quarter. The United States economy also saw a fairly modest benefit from the decreasing trade gap. While there is still a trade deficit, it was reduced by $7 billion. This contributed to the growth in quarter 3 of 2011.

The report is an indication that there in apparently no longer a threat of an imminent double dip recession, however, this does not mean that the United States economy has suddenly become strong or enduring. At present this is definitely not the case, but there is evidence of improvement. A 2.5 percent growth is of course better news than a decrease but it is not quite enough to make a huge impact.

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