Yesterday, the Bureau of Economic Analysis released very positive details about third-quarter economic activity, providing President Bush with a strong economic tail wind as he heads toward Tuesday’s election. Gross Domestic Product (GDP) increased at a 3.7 percent annual rate during the July-September period. Consumer expenditures significantly accelerated from the spring’s soft patch, and business investment continued to grow at a double-digit clip. In short, the economy moved into a higher gear while its two most important components (consumption and investment) reached levels that portend impressive, balanced and sustainable growth.
We now have data for three full years since GDP last declined during the third quarter of 2001, shortly before the recession officially ended in November 2001. The economy has improved during each successive four-quarter period. During the first four quarters, GDP rebounded by 2.5 percent. During the second period, GDP increased at a 3.5 percent pace. During the last four quarters ending in September, GDP accelerated again, rising by 3.9 percent. The compounded annual growth rate over the past 12 quarters exceeds 3.3 percent, an indisputably impressive pace given the fact that the eight-month recession in 2001 was so shallow. Further beyond dispute is the fact that the president’s aggressive tax cutting contributed to the accelerating pace of the three-year expansion.
Indeed, the U.S. economy has expanded by more than 10 percent over the last three years, a cumulative growth rate that substantially exceeds comparable rates of other advanced economies, including Japan and those in Europe. Given that the U.S. stock-market bubble had burst in March 2000 and had been deflating for 18 months before the September 11 terrorist attacks, the three-year expansion represents a remarkable achievement.
The head winds were formidable. During the last four months of 2001, for example, the U.S. economy jettisoned about 300,000 jobs per month. The economy lost more 800,000 additional jobs through August of last year. Nevertheless, due to record-level productivity growth rates, the economy continued its expansion during 2002 and the first half of 2003. Then, it took off, soaring at an annual rate of 7.4 percent during 2003’s third quarter. Since then, the economy has grown by nearly 4 percent over the last four quarters. During that period, more than 1.8 million jobs have been created, while productivity continues to soar. Also, today’s business-investment level shows every sign of ongoing, sustainable growth.
The unemployment rate is 5.4 percent, and consumer prices rose by only 2.5 percent over the past year. The economy expanded by nearly 4 percent during the last year, and more than 1.8 million jobs were created during the past 12 months. Mr. Bush has much to showcase on the economic front, during these waning days before the election.
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