Now there’s (guarded) good news on the economic front — good enough so it’s causing the growing pessimism and emerging pessimism about the economy to shrink.
And another tidbit of good news within this good news: the good news is coming from not just the United States and from Europe.
The U.S. economy grew at its fastest clip in a year during late summer as consumers and businesses shrugged off fears of a new recession, according to government data released Thursday that helped drive the stock market to its best day since August.
Investors were also cheered by overnight news that European leaders have reached an agreement on how to address their continent’s debt crisis, and the Standard & Poor’s 500-stock index ended the day up 3.4 percent. European markets were up even more sharply, with the German Dax index up 5.3 percent.
These two developments will likely feed into the other. MORE:
The agreement in Europe still has many details to be filled in, and the 2.5 percent pace of U.S. economic expansion in the third quarter isn’t enough to bring unemployment down quickly, even if it is sustained. But on both sides of the Atlantic, the news on Thursday offered a sense of relief: Maybe the world isn’t falling apart after all.
“The Europeans told us they’re doing what they can do to take the immediate fear of fnancial collapse off the table, and the GDP numbers tell us that the U.S. economy did not collapse in the third quarter,” said Jerry Webman, chief economist at OppenheimerFunds. “Together they are a kind of sigh of relief.”
Owners of Greek debt will accept a reduction of as much as 50 percent in what they are owed, easing that country’s debt burden; banks will receive new capital; and a fund to back the continent’s governments will be enlarged fourfold, to $1.4 trillion. Analysts cautioned that executing the plan will require more difficult work by European governments in the months ahead.
Over the summer, uncertainty over Europe’s future and a downgrade of U.S. debt helped drive a period of confidence-rattling volatility in global financial markets. But now that the broadest measure of economic activity for that period is in, it appears that U.S. consumers and businesses took the events in stride.
Gross domestic product rose at a 2.5 percent annual pace in the July-through-September quarter, the Commerce Department said, considerably better than the 1.3 percent gain in the second quarter and the 0.9 percent rate of growth for the first half of 2011.
If there is to be a dip back into recession, as some analysts have feared, it appears it did not start in the third quarter.
The key now is to watch the news reports, not the increasingly tiresome politicians.
In doing this post I have MSNBC’s must-watch-for-moderates-and-independents “Morning Joe” on, with a clip of House Speaker John Boehner again giving a political riff about “getting serious” on the economy suggesting that only revenue-raising-refusing Republicans are serious and only the Democrats are playing game. In “ring around the rosie” there have to be more people — and there are in this game: members from both parties fixated on their party bases heading into the elections rather than a bigger base, the people of all or no party who make up the entire electorate and the impact of the economy on their lives.
The Christian Science Monitor:
Maybe there won’t be a double-dip recession in the US.
That’s one possible takeaway of news that America’s economy grew in the third quarter at an annual rate of 2.5 percent – a meaningful improvement over the lackluster first half of the year that had raised concerns about the prospect of back-to-back recessions.
The better growth rate was spurred in large part by somewhat stronger consumer spending, mostly for big-ticket items such as cars and light trucks, according to data from the US Commerce Department. However, the modest growth in gross domestic product (GDP) won’t do much to lower the jobless rate, which has been stuck at about 9 percent…..
…..The report on the economy’s performance comes as European leaders agreed on a plan to start to resolve the European debt crisis. The US stock market surged early Thursday, with the Dow Jones Industrial Average gaining more than 266 points – rising above 12000 for the first time since August.
“The market has priced in a Lehman Brothers-type scenario,” says Mr. DeKaser, referring to the trigger of the financial crash of 2008. “This agreement removes that fear.”
The settlement in Europe could indeed help the US economy, says John Silvia, chief economist at Wells Fargo Securities in Charlotte, N.C.
“The European agreement does remove a certain amount of uncertainty and especially the risk of a big recession in Europe,” says Mr. Silvia. “A big recession in Europe ran the risk of putting the US back in a recessionary mode.”
A key reason the economy bounced back in the third quarter was a pick-up in durable goods orders, which rose 4.1 percent (compared with a drop of 5.3 percent in the second quarter), according to the Commerce report.
Some of this was the result of a “snap back” in vehicle purchases, says Mr. DeKaser, noting that earlier this year some Japanese models were unavailable after the earthquake and tsunami in Japan. “As the inventories were replenished, consumers were able to get autos [that had been] in short supply,” he says.
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.