The economy grew 3.5 per cent in the third quarter, the best showing in two years, fuelled by government-aided spending on cars and homes.
US economic growth signals end of recession
WASHINGTON // The economy grew at 3.5 per cent in the third quarter, the best showing in two years, fuelled by government-aided spending on cars and homes. The Commerce Department's report on Thursday delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended. Many analysts expect the pace of the budding recovery to be plodding due to rising unemployment and continuing difficulties by both consumers and businesses to secure loans. Still, the much-awaited turnaround ended the streak of four straight quarters of contracting economic activity, the first time that's happened on records dating to 1947. It also marked the first increase since the spring of 2008, when the economy experienced a short-lived uptick in growth. The third-quarter's performance - the strongest since right before the country fell into recession in December 2007 - was slightly better than the 3.3 per cent growth rate economists expected. Armed with cash from government support programs, consumers led the rebound in the third quarter, snapping up cars and homes. Consumer spending on big-ticket manufactured goods soared at an annualised rate of 22.3 per cent in the third quarter, the most since the end of 2001. The jump largely reflected car purchases spurred by the government's Cash for Clunkers programme that offered a rebate of up to $4,500 to buy new cars and trade in old gas guzzlers. The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualised pace of 23.4 per cent, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive. The government's $8,000 tax credit for first-time home buyers supported the housing rebound. Congress is considering extending the credit, which expires on Nov 30. The collapse of the housing market led the country into the recession. Rotten mortgage securities spiralled into a banking crisis. Home foreclosures surged. The sector's return to good health is a crucial ingredient to a sustained economic recovery. A top concern is whether the economy can continue to stand on its own feet after government supports are gone. Many economists predict economic activity won't grow as much in the months ahead as the bracing impact of the US president Barack Obama's $787 billion package of increased government spending and tax cuts fades. * AP