President Barack Obama on Thursday hailed the economic growth in the third quarter, although he warned that there is a “long way to go” before the US economy gets back to full-strength.
“This is obviously welcome news and an affirmation that this recession is abating and the steps we’ve taken have made a difference,” Obama said.
Christina Romer, chair of the president’s Council of Economic Advisers, also said that while the US economy is picking up, it would take a while for the country’s output to grow to pre-recession levels.
Americans wait for benefits of economic
“After four consecutive quarters of decline, positive GDP growth is an encouraging sign that the US economy is moving in the right direction,”
“However, this welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered,” she said.
Household spending led the GDP rebound, rising 3.4 per cent after a 0.9 per cent drop in the second quarter. It added 2.36 percentage points to GDP growth.
Consumer spending, which accounts for two-thirds of US economic activity, had ground to a halt in the second half of 2008 as the financial crisis accelerated after the collapse of the Wall Street investment bank Lehman Brothers.
The commerce department said the third-quarter rise in consumer spending “largely reflected” vehicle purchases made under the government’s popular “cash-for-clunkers” programme that expired during the quarter.
“I think we have seen the dollar lose a lot of its value, so we have had a very good export period and that has certainly helped,” Max Fraad Wolff, an economist at New School University in New York, said
“The single biggest driver, though, is that the federal government of the United States has borrowed and spent its next four or five years of tax receipts,” he told Al Jazeera.
“And again we have seen that the general public here has reduced its savings. It has been spending more and saving less.”
Many analysts expect the economic momentum to slow in the fourth quarter, with some forecasting a rate of roughly two per cent, as government stimulus is wound down and consumers face rising unemployment.
While a recession is widely regarded as ended by one quarter of economic growth, in the United States the economy will not be officially out of recession until it has been declared by the National Bureau of Economic Research (NBER).
The NBER said that the recession officially began in December 2007 and has yet to pronounce its end.