October 29, 2009

Analysis of GDP by Bart van Ark, Chief Economist of The Conference Board

The expansion in Q3 GDP (3.5%) shows we have clearly begun to emerge from the trough. But there&rsquo's still a long way to go, and we still don’t know enough about the sustainability of these recovery signals. The comparatively good Q3 news is largely driven by temporary factors like an uptick in consumer spending? notably through the U.S. government’s "cash for clunkers" car sales subsidy program – as well as an easing in inventory rundowns.

Q4 could bring even faster easing in inventory rundowns that accounts for all GDP growth (we forecast 3.1 percent). Consumer spending will fall flat during the holiday season, and exports will recover more slowly than in Q3. Any modest uptick in investments in equipment and software will most likely be offset by continued declines in commercial real estate.

A less powerful inventory boost with no positive offsetting contributors may well limit GDP growth to 1 percent in early 2010. We forecast growth to improve only moderately, to around 2 percent, by the middle of 2010. The savings rate will remain relatively high at 4.5 to 5 percent of disposable income, dampening improvements in real consumer spending, investment and trade.

For further contact information:
Frank Tortorici
(1)212 3390231
f.tortorici@conference-board.org

The U.S. Economic Forecast

Updated: January 13, 2010
Percentage change, seasonally adjusted annual rates (except where note)

* Actual Value

Global Economic Outlook

The Conference Board Global Economic Outlook 2010 projects output growth for major regions of the world economy and the world as a whole for 2009, 2010, and 2011-2016, and takes into account macroeconomic as well as business dynamics such as changes in consumer and labor markets and relative costs. It is built via a wide range of instruments including The Conference Board Total Economy Database for 100-plus countries, Leading Economic Indexes for 10 countries/regions, and exclusive input about the business environment captured from The Conference Board member companies’ executives.

Published annually in the November issue of StraightTalk^®, the Outlook is updated regularly online.