With an annualized growth of 3.5% in the 3rd quarter of this year, it seems as though the US economy is regaining its vigor despite the growls of Wall Street bears. The real question is whether this resurgence will be a temporary phenomena or a sustained reality.
The growth numbers come down to a major increase in final sales
and defense spending, both of which do not spell great news for the economy in a long run. When looking for “good” growth, economists often want to see a surge in investment spending and domestic consumption. Rather than this being the case, aggregate spending in the economy has been bolstered by a closing trade deficit and government (defense) spending. We can conclude that preliminary calculations behind this figure aren’t what we want to hear. However, we must note that not all is gloomy. The increase in exports may be a sign that American industry has picked up and our long-run damaging trade deficit may start coming under control. At the same time, structurally unsound growth mixed with upcoming rate hikes can only mean a sluggish American economy will continue to be…sluggish.
The numbers also are another blow to the President and
Democrats as this growth comes a little too late. After years of minute growth, a temporary jump isn’t going to sway voters in the upcoming midterm elections. Early polling is showing that Republicans stand to takeover the Senate and maintain a firm grip on the House. This will mean that Democrats will have little to no say in government for the remainder of Obama’s presidency, further complicating the Federal response to foreign issues and economic weakness.
Overall, it looks like the numbers aren’t telling the whole
story upfront. We will see what true growth is at the end of the year and if the number that came out this quarter holds firm come winter.