Fleet Management

Economic Watch: GDP Continues Growing, Fed Ending Stimulus Program

October 30, 2014

By Evan Lockridge

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One of the broadest measures of the health of the American economy shows it expanded at an annual rate of 3.5% in the third quarter of the year.

This first of three estimates of the gross domestic product by the U.S. Commerce Department is down from an annual rate of 4.6% in the second quarter of the year, but marks the strongest back-to-back quarterly performance since the final half of 2003.

During the first quarter of the year the GDP contracted at an annual rate of 2.1%, due in large part to the harsh winter and likely contributed to the strong rebound in the second quarter.

This most recent performance by the GDP, which measures the total output of goods and services produced, was higher than many economists were expecting.

“The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures, exports, nonresidential fixed investment, federal government spending, and state and local government spending that were partly offset by a negative contribution from private inventory investment,” the department said in a release. “Imports, which are a subtraction in the calculation of GDP, decreased.”

This news follows an announcement Wednesday by the U.S. Federal Reserve that it is ending this month its extensive bond buying and economic stimulus program known as “quantitative easing.”

According to a statement from the Fed it made the decision because evidence suggests the economy is expanding at a moderate pace while there have been solid gains in the labor market and a lower unemployment rate along with household spending rising moderately and business investment increasing.

“All those sleepless nights and excessive nail biting over the last month were for naught, with yesterday's statement extremely anticlimactic,” said Lindsey Piegza, Sterne Agree chief economist. “The Fed expectantly opted to tread carefully, altering as little as possible in terms of key language within the statement, to avoid any further unwelcome volatility. Even with rising disinflationary fears, the Fed refrained from sounding the alarm bells, and instead focused on the modest improvement in the labor market, and all the while spelling out in further detail their data-dependent stance.”

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