U.S. Stocks Rise, GDP Falls

123jump.com Staff
30 Oct, 2008
New York City

Third quarter GDP adjusted for seasonality fell at annual rate of 0.3% from the second quarter after rising at a rate of 2.8% in the second quarter and 0.9% in the first quarter. The sharpest pull back in consumer spending in the last three decades of 3.1% contributed to the weakness the GDP data.

[R]10:15AM New York – GDP shrank at 0.3% in the third quarter on the largest pull back in consumer spending in nearly three decades. Initial claims for unemployment were flat.[/R]

U.S. gross domestic product after adjusting for seasonal effects fell at annual rate of 0.3% in the third quarter ending in September from the second quarter. The GDP rose 2.8% in the second quarter and 0.9% in the first quarter and fell 0.2% in the last quarter of 2007, according to the Commerce Department.

Strong federal government spending and a rise in inventory added to the growth in the economy but the consumer spending, decelerating exports and a fall in residential fixed investment.

Weak consumer spending, housing market and business spending contributed to the weakness in the quarter. Consumer spending, which is nearly 70% of GDP, fell 3.1% after rising 1.2% in the second quarter. The durable goods sales decline 14.1% in the quarter after falling only 2.4% in the second quarter.

The pull back in consumer spending was the largest in the last 28 years. If consumer continue to keep a tight grip on their wallets economy is likely to shrink further in the fourth quarter of this year and in the first quarter of next year.

The continued weakness in the housing market dragged the GDP further down. In the second quarter residential fixed investment plunged 19.1% after falling 13.3% in the second quarter.

The federal government spending surged in the quarter by 19.8% following a rise of 6.6% in the second quarter. National defense spending rose 18.1% and real state and local government spending increased 1.4% compared to a rise of 2.5% in the second quarter.

Current-dollar GDP -- the market value of the nation''s output of goods and services – increased 3.8%, or $134.7 billion, in the third quarter to a level of $14,429.2 billion. In the second quarter, current-dollar GDP increased 4.1%, or $143.7 billion.

Jobless Claims Unchanged

The seasonally adjusted jobless claims for the week ending October 25 were 479,000 matching the revised data for the previous week. The advance seasonally adjusted insured unemployment rate was 2.8% for the week ending on October 18, unchanged form the previous week.

The unadjusted advance number of claims was 443,728 for the week ending on October 25, an increase of 27,617 from the previous week. The unadjusted claims for the comparable week in 2007 were 303,357.