By Robert Schroeder, MarketWatch
WASHINGTON (MarketWatch) — Friday’s report showing that the U.S. economy grew by 2.0% in the third quarter indicates that modest growth will continue in the near future, economists said. Following is a sampling of quotes from analysts’ notes put out after the report. Read MarketWatch story about third-quarter GDP.
• “The bottom line is that the Commerce Department assessed that the economy performed considerably better in Q3 than I had expected. Real domestic demand increased at a 2.3% annualized rate, more than a full percentage point better than I had forecast and the fastest growth in nearly 2 years. Does that feel right to you? Me neither. I would look for the headline figure to creep down from 2.0% to something closer to my estimate of around 1½% when all of the data are in.” — Stephen Stanley, chief economist, Pierpont Securities.
• “Relative to Q2 the switch in the balance of growth towards consumption and residential investment and away from structures, equipment and software investment and net exports was notable, and timely indicators suggest that this may persist into Q4. However, the report provides nothing to suggest that US activity is breaking out of the modest growth environment in either a positive or negative direction.” — Peter Newland, Barclays.
• “With less than two weeks to go before the election, the conspiracy theorists will be up in arms about the reported 9.6% surge in federal spending, which contributed as much as 0.7% to overall GDP growth. In general, federal spending is likely to return to its downward trend next year and could shrink even more sharply if the fiscal cliff sequestration cuts aren’t averted.” — Paul Ashworth, chief U.S. economist, Capital Economics.
• “All in all, there is nothing in today’s report [which] alters the likelihood that real GDP growth is going to remain on an anemic path [as the] economy continues to struggle with the aftermath of a burst credit/asset price bubble. That economic growth has been as weak as currently reported in spite of unprecedented monetary and fiscal stimulus speaks volumes about the severity of the post-bubble adjustment process.” — Joshua Shapiro, chief U.S. economist, MFR, Inc.
• “Inventories were a minor negative, meaning that real final sales, at 2.1%, was incrementally stronger than headline GDP. Overall a slightly better number which will be supportive for stocks, and negative for fixed income, although the large contribution from government is a concern in the detail.” — Andrew Grantham, CIBC WM Economics.
• “This report had little impact on our expectation for Q4 GDP, which we see tracking near +1.2%, with the favorable inventory implications of the Q3 data being about offset by an expected payback in defense spending.” — David Greenlaw, Morgan Stanley Research.
Robert Schroeder is a reporter for MarketWatch in Washington.
