On Friday, the Commerce Department announced that the U.S. economy grew for the third quarter in a row, with real GDP (gross domestic product) climbing at an annualized rate of 3.2% in the period ending in March. What a difference a year makes. At this time in 2009, the U.S. economy had just suffered three consecutive declines of sharp declines in output.
The economy was not firing on all cylinders in this year’s opening quarters. Homebuilding, which had started to move higher, reversed gears, although adverse weather may have exacerbated the downturn. The stresses in commercial real estate and in state and local government budgets also caused decreases in those sectors.
Although fiscal and monetary stimulus is helping to restart the U.S. economic engine, the private sector does show signs that it is ready to seize the growth baton. While direct purchases of goods and services by the government sector has dropped during the past two quarters, output in the nonfarm business sector soared at an annual rate of 7.0% in last year’s final quarter and at a 4.4% pace in this year’s first quarter.
Consumers have started to become more confident and are spending again on home furnishings, electronics, clothes, entertainment and restaurants. Companies, benefiting from reduced debt loads and rising profits, are ramping up spending on technology. Exports are also rising, particularly to developing nations.
The U.S. economy is far from a condition of complete health. The job market is just beginning to improve. Yet, a recovery is clearly under way.