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: November 11, 2009
Percentage change, seasonally adjusted annual rates

* Actual Value