Economic rebound not as strong

The first revision of gross domestic product (GDP) for the third quarter shows slower growth than initially thought.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Chris Isidore, CNNMoney.com senior writer

chart_gdp_1124.03.gif
6 double dip warning signs
The recovery from the Great Recession has likely started. But many economists are worried about falling into another downturn. Here's what has them concerned.

NEW YORK (CNNMoney.com) -- Economic growth was weaker in the third quarter than originally reported, according to government data released Tuesday.

The gross domestic product, the broadest measure of the nation's economic activity, rose at an annual rate of 2.8% in the three months ending in September, according to the Commerce Department's first revision of the reading. The initial reading of the report a month ago came in with a 3.5% growth rate.

The decline in the growth rate was expected, in large part because of a recent report showing a growing gap between the nation's imports and exports. Importing goods from other countries is a drag on domestic U.S. growth.

Less spending, less investment, fewer cars: The GDP report had other downward revisions too. Specifically, it contained lower estimates for spending by both consumers and by businesses, and also less investment in both homes and nonresidential buildings.

In addition, there was less of a boost than initially thought from the sale and production of autos and the rebuilding of inventories. During the depths of the recession, businesses slashed inventories, and rebuilding them would contribute to GDP.

"It's unusual to have almost all the revisions go in the same direction," said economist Bob Brusca of FAO Economics. "Growth of 2.8% certainly sounds different to the ear than 3.5% growth. But you've still got growth, you're still turning the corner."

The recession may be over -- but not officially: The third quarter snapped a streak of four straight quarters during which the nation suffered the most severe economic decline since the Great Depression. And there is widespread consensus among economists that the recession likely ended at some point this past summer.

The report does not mark the official end of the recession, though. That determination will be made by the National Bureau of Economic Research, likely sometime in 2010 once all the various economic readings have had their final revisions.

There has been growing concern in recent weeks about whether the economy will continue to post solid growth, or whether the country is at risk of again starting to decline -- a situation known as a "double dip."

Even many of those who think that a double dip will be avoided question how strong the recovery will be. Federal Reserve Chairman Ben Bernanke said in a speech last week that the economy is facing headwinds that will stop growth "from being as robust as we would hope."

Higher GDP doesn't mean more jobs: Top economists recently surveyed by the National Association of Business Economics forecast GDP growth of 3% in the fourth quarter and a 3.2% rise in economic activity over the course of 2010.

But they have pushed back their estimates for when economy will start adding jobs again until the second quarter of next year. The nation's unemployment rate hit 10.2% in October. (See: "Are things really getting better?") To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Sponsors
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

First update. Adds details and analyst comment.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.