Economic Data Released Last Week Continues to Support Case for Moderate U.S. Economic Growth

Dr. David Krause, AIM program director commented, "The release last week of the revised Q3 GDP figures and the October Chicago Fed National Economic Activity Index showed continued positive growth for the U.S. economy. The GDP for the third quarter was revised up to 2.5% from 2.0%. While this rate is still below the 3.0% average historical growth rate for the U.S. economy, it continues to suggest the reduced likelihood of a double dip recession. I think the U.S. economy is in better shape than the view of most economists and pundits. The weaker U.S. Dollar and stronger than expected holiday sales are going to result in a 2011 that exceeds consensus."

The historical U.S. GDP graph shown below is from Calculated Risk. The revised Q3 data is shown in blue.

Dr. Krause continued, "The other major economic release last week was the Chicago Fed's October National Activity Index which showed a slight pickup from the previous month. The index’s three-month moving average is less than zero, which like the GDP data suggests that growth in national economic activity is still below its historical trend. The report also showed considerable economic slack and subdued inflationary pressure which will likely continue over the next few months."

He continued, "The encouraging news, however, was that production-related indicators in the U.S. made a positive contribution to the index in October. This news continues to suggest that manufacturing is advancing and that factory capacity utilization is improving. The trend continues to be one of steady, positive advancement. While employment is lagging, I think we will see an improvement in private hiring as production and capacity utilization continue to improve. These are finally the 'green shoots' of recovery that we've been waiting to see."

The Chicago Fed National Activity Index shown below is from Calculated Risk.