By: Mike Campbell
The world’s largest economy returned to growth in Q3 2009 after four successive quarters of recession. The initial growth estimate was a fairly robust 3.5%, but the figure had to be revised downwards to 2.8% as hard numbers began to emerge. The figure has been re-evaluated and now stands at 2.2%. The reason for the lower figure is that companies spent less on their inventories than predicted; investment in commercial construction projects was overestimated and consumer spending was weaker than thought (2.8% vs 2.9%). Consumer spending has been bearish over concerns about job security. With a tenth of the workforce looking for work and a perception that the worst may not be over, consumers have been reluctant to part with their cash. It is anticipated that the Q4 GDP figure will be around the 4% mark since companies will need to replenish inventories that have been drawn down which have become seriously drawn down during the recession.
Brighter news has emerged on the US housing front. With a little help from Uncle Sam’s incentive package, figures for new house sales in November were up by 7.4%. According to the US National Association of Realtors, the national rate of house sales was 6.5 million; representing the best performance since 2007. Whilst the higher level of new house sales is probably closely linked to the tax credit incentive, the association believes that many additional buyers are poised to enter the market over the coming months. The figures were enough to encourage the Dow to put on 50 points and to see both the Nasdaq and the Standard and Poor’s indexes to close at their highest levels this year.
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