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WASHINGTON: The US economy exited severe recession in the third quarter, posting the strongest growth in two years as government stimulus boosted consumer spending, government data showed on Thursday.
After four quarters of contraction, the economy grew at a seasonally-adjusted 3.5 percent annual rate in the July-September period from the prior quarter, the Commerce Department reported.
It was the strongest expansion since the 2007 third quarter, when a US sub-prime mortgage crisis triggered a global financial crisis that hammered the world economy, and marked the end of the worst recession since the Great Depression.
The department's first estimate of third-quarter gross domestic product (GDP), the broadest measure of the output of goods and services in the world's largest economy, topped the 3.2 percent rate expected by most analysts.
The department said the economy shrank an unrevised 0.7 percent in the second quarter.
The White House welcomed the news, saying that massive stimulus efforts by President Barack Obama's administration had fuelled the growth.
"After four consecutive quarters of decline, positive GDP growth is an encouraging sign that the US economy is moving in the right direction," said Christina Romer, chair of the president's Council of Economic Advisers.
"However, this welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered," she said.
Treasury Secretary Timothy Geithner said the recession remains "alive and acute" for millions of Americans.
"Unemployment remains unacceptably high for every person out of work, for every family facing foreclosure, for every small business facing a credit crunch, the recession remains alive and acute," he said.
Household spending led the GDP rebound, rising 3.4 percent after a 0.9 percent drop in the second quarter. It added 2.36 percentage points to GDP growth.
Consumer spending, which accounts for two-thirds of US economic activity, had ground to a halt in the second half of 2008 as the financial crisis accelerated after Wall Street investment bank Lehman Brothers collapsed.
After shrinking a severe 6.4 percent in the first quarter, the world's largest economy has been showing some signs of life in response to the government's multi-billion-dollar emergency stimulus and support measures.
Many analysts expect the economic momentum to slow in the fourth quarter, with some forecasting a rate of roughly 2.0 percent, as government stimulus winds down and consumers face rising unemployment.
The Commerce Department said the third-quarter rise in consumer spending "largely reflected" auto purchases under the government's popular "cash-for-clunkers" programme that expired during the quarter.
"A decent quarter, thanks in part to stimulus; expect much weaker Q4 (fourth quarter)," said Ian Shepherdson, chief US economist at High Frequency Economics.
While a recession is widely regarded as ended by one quarter of economic growth, in the United States the economy will not be officially out of recession until it has been declared by the National Bureau of Economic Research.
The NBER, the official arbiter of business cycles, declared the recession began in December 2007 and has yet to pronounce its end.
Grim reports on consumer confidence and new-home sales this week have stoked fears that the green shoots of recovery are withering amid high unemployment that could continue to drag down any recovery. The jobless rate rose to 9.8 percent in September, a 26-year record, and is expected to rise into double digits even after the economy recovers.
According to a Wall Street Journal/NBC News poll published on Wednesday, Americans are growing increasingly pessimistic about the economy after a mild upturn in attitudes in September.
Fifty-eight percent of those surveyed in the October 22-25 poll said the downturn would get worse, up from 52 percent in September and back to the level of pessimism expressed in July. - AFP/ir/de
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