U.S. GDP Growth Meager, but No Double Dip

U.S. GDP might have grown only 2 percent during 3Q10, but at least that damps down talk of a double-dip recession, which was all the rage among prognosticators over the summer.

November 1, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user morrissey

U.S. GDP might have grown only 2 percent during 3Q10, but at least that damps down talk of a double-dip recession, which was all the rage among prognosticators over the summer. The final revised figure for growth during 2Q10 was 1.7 percent, so the third quarter eked out a gain (maybe; revisions lie ahead).

The Bureau of Economic Analysis noted that the increase in GDP during the quarter was driven by “personal consumption expenditures” (people shopping, in other words), private inventory investment, nonresidential fixed investment, federal government spending, and exports. A “negative contribution” was made by “residential fixed investment” (the housing market still stinks, in other words). Imports, which are a subtraction in the calculation of GDP, increased.

Whatever growth the economy saw in 2Q10 isn’t doing much for consumer confidence, however. The latest Reuter’s/University of Michigan’s Consumer Sentiment expectations index slipped fell 2.7 points from mid-month to a weak 59.2 for the last two weeks of the month. A 50 reading or worse indicates a recession state of mind for consumers, so the latest numbers aren’t quite as bad as they could be, but not the kind of confidence retailers especially want to see as the buildup to the holiday sales season gets under way.

QE2 Ready to Set Sail

For some time now, those same economic prognosticators have been talking about QE2–the shorthand for the second quantitative easing, the Federal Reserve’s planned stimulus through buying debt. This week the Federal Open Market Committee will meet to kick QE2 into motion. The goal of QE2 is to lower yields on long-term Treasuries, which in theory lower mortgage rates and corporate bond yields.

Currently, the Fed has about $1.7 trillion of agency debt and mortgage-backed securities on its balance sheet, most of which it bought back in the grim days of late 2008 and early 2009. By comparison, the entire GDP for the United States in 2009 was a bit more than $14.1 trillion, according to IMF estimates. QE2 is expected to involve $500 billion worth of asset purchases over six months, or roughly the pace of the federal budget deficit.

Depending which commentator one readers, that will either help lift the economy, precipitate the complete collapse of the economy that didn’t happen in 2008, or something less dramatic all together–namely, that it won’t really hurt things, but also won’t put any hustle in the muscle of the economy.

Ohio AG Takes Wells Fargo to Task

Ohio Attorney General Richard Cordray has focused his office’s attention on a particular robo-signer that he said he’s identified, one who works for Wells Fargo Bank in Ohio. On Friday, Cordray sent a letter to 133 Ohio judges asking them to send him copies of the affidavits she supposedly inked on the fly.

Separately, the Ohio AG said in a letter to Wells Fargo itself, offering to take the bank to the woodshed, in as much as a state AG can do that. “It is not acceptable for a party who believes they submitted false court documents to merely replace those documents. Wells Fargo and any other banks are not simply allowed a ‘do-over,’ ” the letter said.

Pre-Halloween trading proved to be not particularly scary for Wall Street on Friday, with the exchanges ending up virtually even (though the size and scope of QE2 might get stocks moving for better or worse soon). The Dow Jones Industrial Average gained 4.54 points, or 0.04 percent, while the S&P 500 lost 0.04 percent. The Nasdaq didn’t budge at all.