Plus: Durable Goods Decline and Jobless Claims Fall.

U.S. GDP Climbs at Faster Rate in Q3
The United States economy grew at its fastest pace in a year in the third quarter, as consumers and businesses increased spending, according to the U.S. Department of Commerce last week. U.S. gross domestic product (GDP), the value of all goods and services produced, rose at a 2.5 percent annual rate, nearly doubling the 1.3 percent rate of the second quarter and taking output back to the pre-recession level.

“After almost two years of recession and two years of slow recovery, the economy has finally entered its expansion phase,” finance site Seeking Alpha explains.

While the growth rate matched economists’ forecasts, domestic demand showed a bit more vigor than most had expected.

Consumer spending climbed 2.4 percent, the highest rate since the end of 2010 and up from a 0.7 percent increase in Q2. Although consumer spending was triple the Q2 level, “Americans earned less, on an inflation-adjusted basis, in the July-September period,” the Associated Press says. “That meant that many people financed their spending binges by cutting back on savings. Few economists think that can continue.”

Meanwhile, business investment shot up 16.3 percent, compared with 10.3 percent in Q2, as businesses invested more in software and vehicles, among other products.

Real exports of goods and services increased 4 percent in Q3, up from 3.6 percent in Q2, while real imports rose 1.9 percent, up from 1.4 percent in the previous three months.

“Still, one did not have to look far to find cautionary signs in the American economic report,” the New York Times reports. “Economists do not expect growth to accelerate in the next few quarters to the point that it drives the unemployment rate well below 9 percent. The improvement is simply not enough to be perceptible to anxious American families.

The economy needs to grow at a rate of more than 2.5 percent over a sustained period to cut the jobless rate.

Durable Goods Orders Drop in September
New orders for U.S. durable goods fell 0.8 percent in September, following a 0.1 percent decline in August, according to a report from the U.S. Department of Commerce last week. However, excluding the often-volatile transportation sector, new orders actually rose 1.7 percent.

The value of durable goods orders last month decreased $1.5 billion to a total of $200.3 billion, marking the third decline in the last four months. Transportation equipment had the largest loss, dropping by $4 billion, or 7.5 percent. Apart from the transportation category, durable goods posted solid growth in September, with orders for primary metals climbing 2.6 percent, electrical equipment by 1.9 percent, machinery orders by 1.8 percent and computers and electronic products by 1 percent.

“In spite of the considerable uncertainties in the U.S. and global economic climates, the September report on demand for long-lasting goods suggests that U.S. manufacturing growth will likely remain positive over the near-term,” Cliff Waldman, economist for the Manufacturers Alliance/MAPI, said in an analysis of the durable goods report. “Industry data point to slowing but sustained growth in the factory sector as convincingly positive demand for primary and fabricated metals as well as machinery suggest that manufacturing supply chains are active and filling orders.”

Non-defense capital goods (excluding aircraft) orders — a key gauge of private-sector trends and an important factor in calculating GDP — climbed 2.4 percent to $68.9 billion, the largest increase since March and a strong sign that business spending is picking up.

Meanwhile, durable goods shipments, down three of the last four months, continued to decline in September, dropping 0.7 percent to $200.1 billion. Excluding transportation equipment, shipments fell 0.1 percent last month.

“The resilience of the manufacturing sector, bolstered by higher exports, is largely responsible for keeping the U.S. from falling back into recession amid a tough economic climate in 2011,” MarketWatch reports. “Still, economists say the U.S. cannot be assured its recovery will continue unless persistently high unemployment at home begins to fall and Europe — a huge market for American exports — resolves its debt crisis.”

Jobless Claims Inch Downward
New initial jobless claims decreased slightly in the latest week reported, according to the U.S. Department of Labor. Seasonally adjusted unemployment claims for the week ending October 22 fell to 402,000, a decrease of 2,000 from the previous week. However, the four-week moving average, which is a considered a more accurate indicator of employment trends, climbed 1,750 to total 403,750.

The results fell slightly short of expectations, as economists polled by Reuters had forecast claims to drop to 400,000 for the week. Jobless claims must typically fall below the 400,000 mark to indicate healthier labor market conditions, but claims have hovered above that level for most of the year.

“Even the four-week moving averages, which economists use to smooth out volatility, have also bounced around,” CNNMoney explains. “Given those trends, many are predicting the unemployment rate remained at 9.1 percent in October for the fourth straight month in a row.”

On a positive note, the number of people receiving state unemployment benefits decreased by 96,000, falling to 3.65 million through the week of October 15, the lowest level since September 2008. However, the economy needs to add at least 125,000 jobs per month to keep up with the growing labor force, and significantly more to drive down the national unemployment rate.

“The rate has been stuck at 9.1 percent for three straight months. Analysts project similar growth for the October-December quarter,” the Associated Press reports. “The economy would need to expand by about 4.5 percent for a year to reduce the unemployment rate by a full percentage point. The rate has been near 9 percent for more than 2.5 years, the longest such stretch since the Great Depression.”