This week we saw something that hadn’t happened in over a year: growth in real GDP. Indeed, real GDP expanded 3.5 percent on an annualized basis during the third quarter, bolstered by consumer spending, business equipment spending, housing construction and exports. In a bit of a statistical quirk inventories declined sharply yet again, but since the rate of liquidation was smaller than in Q2, it actually contributed a bit to topline growth. The results weren’t a complete surprise given the temporary boosts engendered by federal stimulus spending (“cash for clunkers”, the tax credit for first-time homebuyers, etc.) and a decelerating inventory sell-off. At this point, our concerns should be focused a few quarters down the road because once the impacts of these sweeteners fade, consumer spending, capital expansion, exports or some other macroeconomic driver will need to be strong enough to ‘step up’ and fill in the gap.


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