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Thread: Economy grows at an astounding 8.2% annually

  1. #1
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    By JEANNINE AVERSA, Associated Press Writer

    WASHINGTON - The economy roared ahead at an astounding 8.2 percent annual rate in the third quarter, the fastest pace in nearly two decades and a much stronger performance than previously thought. It raises hope that a long spell of lackluster business activity is finally over


    The revised gross domestic product (GDP (news - web sites)), released by the Commerce Department (news - web sites) Tuesday, was a full percentage point higher than the 7.2 percent growth rate estimated a month ago.


    The new estimate, based on more complete data, reflected stronger investment by business on new equipment and software, less severe cuts in companies' inventories and more brisk spending on residential projects.


    Those were the main factors behind the upward revision to third-quarter GDP, which measures the value of all goods and services produced within the United States and is considered the broadest barometer of the country's economic health.


    "I think there's a better mix of growth in this report, with capital spending being a major portion of the upward revision," said economist Ken Mayland, president of ClearView Economics. "The economy is regaining the confidence of businesses and they are stepping up to the plate and spending and investing for the future."


    The 8.2 percent growth rate more than double the 3.3 percent pace registered in the second quarter represented the best showing since the first quarter of 1984, when the economy surged at a 9 percent pace. Economists were predicting third-quarter GDP would be revised up, with estimates ranging from a 7.3 percent pace to an 8 percent pace.

    Senate minority leader Tom Daischle was quoted as saying, "this is a very sad day."

    Near rock-bottom short-term interest rates and President Bush (news - web sites)'s third round of tax cuts motivated businesses and consumers to spend and invest more, helping the economy to move at such a fast clip in the third quarter, economists say. The next challenge is making sure the rebound is lasting.


    The Bush administration believes the economy is poised for solid growth and stronger job creation in the months ahead. That is politically important to Bush as he heads into the 2004 campaign. Democrats, however, blame Bush for the loss of 2.3 million jobs since he took office in January 2001 and argue that the tax cuts contributed to the record 2003 budget deficit.


    For out-of-work Americans, though, it probably doesn't feel like much of an economic recovery. Only recently has the battered labor market shown signs of improving. In October, the unemployment rate improved fractionally, to 6 percent, as the economy added jobs for the third straight month.


    Steady improvements in job creation and in capital investment are crucial ingredients for the economic recovery to be self sustaining, economists say.


    Analysts believe the economy will grow at a slower, but still healthy rate of at least 4 percent in the current October-to-December period as some of the stimulus provided by the tax cuts and a surge in mortgage refinancing fade.


    Against this backdrop, Federal Reserve (news - web sites) policy-makers are expected to hold a key short-term interest rate steady at a 45-year low of 1 percent at its next meeting on Dec. 9.

    From his barstool Ted Kennedy admitted trying to sabotage all good economic policies.

    In the GDP report, consumers continued to do their part to keeping the economy going. They boosted spending in the third quarter at a 6.4 percent rate. That was up from a 3.8 pace in the second quarter, but down slightly from the 6.6 percent rate previously estimated for the third quarter.


    Especially encouraging was a 18.4 percent growth rate in business investment in new equipment and software in the third quarter. That was even stronger than the 15.4 percent pace previously estimated for the quarter and up from a 8.3 percent pace in the second quarter.

    New York Senator Hypocrisy Clinton pointed the finger at the President blaming him for a shortfall and stating the economy should be growing at a rate of 8.35% annually.


    Spending on residential projects grew at a whopping 22.7 percent pace in the third quarter, also better than the sizable 20.4 percent growth rate first estimated and up from a 6.6 percent pace in the second quarter.


    Fewer cuts to business inventories in the third quarter resulted in a 0.16 percentage-point increase to GDP in that three-month period, compared with a 0.67 percentage-point reduction to GDP as previously estimated.


    Another factor in the upward revision to GDP in the third quarter: Slightly stronger spending by state and local governments. These governmental bodies boosted spending at a 2.3 percent pace, up from a 1.3 percent growth rate previously estimated.

  2. #2
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    Amazing -- all this with a "monkey" running the show.

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    Once the (lagging) jobs recovery kicks in in a few motnhs, things will (potentially) be sustainable, in the short term. This will most likely be enough to keep W elected.

    However, the dollar is very weak and I feel that US equities are still widly over-valued and that this is just a dead-cat bounce. This IS the longest and biggest bear market rally compared to those others (others are US 1929-1932, and 1965 to 1974 and Japan 1990 to 2002?) but it is relevant to point out that this rally has been given more external stimulus than those others (rates, tax cuts), so it is reasonable to expect good short-term results. Investors are confident and speculating at very low risk right now and jumping back into the same TMT stocks that created the mother of all bubbles, and the stock market is still wildly over-valued. A violent correction is coming and it is going to be ugly! The FED is doing the same stupid things they were during during the TMT bubble!!! We are entering a phase of prices being almost 25x trailing normalized earnings, while the historical mean is below 16x. I predict that 2005 will be an AWFUL year for the US equity market because these rations are going to rise up to 30x during 2004.

    This is almost TOO rapid...bear market rallies are weird things, because you are never sure of what IS happening until it has ALREADY happened, but one things that ALWAYS happens (if this is indeed a sucker's rally) is that the NEW low is always lower than the old low. Get used to 7500 in 2005...IMO it's gonna happen!

    Prediction - this raally continues strongly throughout most of 2004, with the last two quarters of 2004 showing a decline. 2005 will be horrible.

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    [quote][i]Originally posted by jets5ever[/i]@Nov 25 2003, 10:43 AM
    [b] Once the (lagging) jobs recovery kicks in in a few motnhs, things will (potentially) be sustainable, in the short term. This will most likely be enough to keep W elected.

    However, the dollar is very weak and I feel that US equities are still widly over-valued and that this is just a dead-cat bounce. This IS the longest and biggest bear market rally compared to those others (others are US 1929-1932, and 1965 to 1974 and Japan 1990 to 2002?) but it is relevant to point out that this rally has been given more external stimulus than those others (rates, tax cuts), so it is reasonable to expect good short-term results. Investors are confident and speculating at very low risk right now and jumping back into the same TMT stocks that created the mother of all bubbles, and the stock market is still wildly over-valued. A violent correction is coming and it is going to be ugly! The FED is doing the same stupid things they were during during the TMT bubble!!! We are entering a phase of prices being almost 25x trailing normalized earnings, while the historical mean is below 16x. I predict that 2005 will be an AWFUL year for the US equity market because these rations are going to rise up to 30x during 2004.

    This is almost TOO rapid...bear market rallies are weird things, because you are never sure of what IS happening until it has ALREADY happened, but one things that ALWAYS happens (if this is indeed a sucker's rally) is that the NEW low is always lower than the old low. Get used to 7500 in 2005...IMO it's gonna happen!

    Prediction - this raally continues strongly throughout most of 2004, with the last two quarters of 2004 showing a decline. 2005 will be horrible. [/b][/quote]
    Jobs are always the last aspect of a recovery to kick in; companies are not going to invest in manpower unless they are confident the economy is turning...BTW: Dell announced this morning they are closing their call center in India and moving it back to the United States!

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    This guy makes a lot of sense...this is just PART of what's coming:

    [url=http://www.foxnews.com/story/0,2933,104091,00.html]http://www.foxnews.com/story/0,2933,104091,00.html[/url]

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    [quote][i]Originally posted by jets5ever[/i]@Nov 26 2003, 11:20 AM
    [b] This guy makes a lot of sense...this is just PART of what's coming:

    [url=http://www.foxnews.com/story/0,2933,104091,00.html]http://www.foxnews.com/story/0,2933,104091,00.html[/url] [/b][/quote]
    Robert Folsom's article makes perfect sense to me.

    I foresee the Fed slowly raising interest rates in the upcoming year. I've already begun positioning my portfolio to take advantage of it.

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