That’s up from 1.3% in the second quarter. It also slightly exceeded expectations, which predicted growth of 1.9%. A sum-up from the Tweetosphere:
GDP growth in Q3 was: 1. Higher than expected; 2. Faster in the US than other industrialized countries; 3. Slower than US historical average — Justin Wolfers (@justinwolfers) October 26, 2012
Political impact? Folks know if takehome pay is rising or if their son-in-law is still looking for work. More important than 1.9% vs 2.0% — James Pethokoukis (@JimPethokoukis) October 26, 2012
GDP at 2% — tough to beat an incumbent in a growing economy. — Ryan Lizza (@RyanLizza) October 26, 2012
Josh Mitchell sees flat spending on equipment and software in September as a sign that companies are “skittish about weaker economies abroad as well as looming tax increases and government spending cuts in the U.S.,” referring in the latter point to the “fiscal cliff” that might hit at the beginning of next year. Ed Morrissey attributes the higher-than-expected bump to federal government spending – in particular, defense expenditure increases of 13.0%:
[The boost from spending on national defense] has a lot to do with the improvement, especially since exports actually fell in the quarter by 1.6%. Personal consumption kept pace with the overall number at 2.0%, though — not enough to give any indication of a massive consumer-fueled growth spurt on the horizon. Real final sales of domestic product came in at 2.1%, which shows that the 2.0% growth wasn’t due to inventory inflation, as was the case at the end of 2009.
After reminding everyone that today’s data is subject to revision, Yglesias contextualizes the defense number:
I once asked some Treasury Department officials why the defense purchases numbers bounce around so much given that they’re on an annual budget cycle, and they said basically that they don’t know. Which is just to say that while that quarter-to-quarter change is striking, it’s not particularly unusual and reflects one of the many sources of noise in the data that it would be wise to avoid reading too much into.
He also calls attention to another data point:
The most interesting specific piece of news is that though state and local government purchases shrank in Q3 they shrank only very slightly and by the smallest margin we’ve seen since 2009. State and local balanced budget requirements have been a longstanding drag on the American economy but with the housing sector seeing an uptick in activity they may be looking less stretched in the future.
Dylan Matthews explains what the GDP figure means for Obama:
Politically, [it's] good news for the president’s reelection campaign–at least according to most election forecasting models. Given President Obama’s pre-summer approval rating of 46.4 percent (which the model uses to allow predictions months ahead of time), and the average growth rate of 1.766 percent for 2012 to date, the Wonkblog election model puts the odds of Obama winning at about 81.3 percent.
Meanwhile, Steve Hansen and Doug Short caution against reading too much into the data:
It does not measure wealth, disposable income, or employment. In short, GDP does not measure the change of the economic environment for Joe Sixpack in 1970, and Joe Sixpack’s kid, yet pundits continuously compare GDP across time periods. Although there always will be some correlation between all economic pulse points, GDP does not measure the economic elements that directly impact the quality of life of its citizens.
The announcement of the October jobs report next Friday will be the last release of major economic data before the election.
(Chart from Steve Benen)