The Marketplace Report: U.S. Economy Grows
ALEX CHADWICK, host:
Back now with DAY TO DAY. I'm Alex Chadwick.
The latest government measure of the economy is out today. It shows healthy growth in the third quarter, thanks to a lot of spending by consumers and robust investments by business. The report from the Commerce Department also indicates housing construction grew sharply and inflation slowed a bit. Joining us to discuss all this, what sounds like, very good economic news to me: John Dimsdale from the "Marketplace" Washington bureau.
Everyone must be happy, John.
JOHN DIMSDALE reporting:
Absolutely. It's better than all the predictions. Gross Domestic Product, which measures all the goods and services produced in the US, grew 4.3 percent between July through September. That's the best in a year and a half, and it's happening despite the hit from this fall's hurricanes. Inflation, which has been running a bit hot recently, moderated from 1.7 percent in the previous quarter to 1.2 percent. Now you combine all that with strong consumer confidence, the housing growth, and you have to conclude that, you know, the economy has really hit a sweet spot here. November's employment report, which is going to be out on Friday, should be pretty good.
CHADWICK: Well, two things: First, what explains all these good reports about the economy? And somehow whenever you have this kind of wave of good economic news, it always seems the market goes down for some reason. I don't get it.
DIMSDALE: Well, the disruptions from the hurricanes weren't as bad as expected, for one thing. Sure, they threw a lot of people out of jobs. They messed up energy supplies and hurt some other trade. But maybe the repairs and the rebuilding and recovery created opportunities that have compensated for all of that. And as you mentioned, you know, there are always the folks who see this from `the glass is half empty' side, and they say this economic activity is pretty flimsy. The GDP statistics are really only measuring consumption, which is being held up not by factories and good jobs and productivity but by debt: household debt, government debt, trade debt--all financed in large part by foreign countries. And these folks that all the good news is really pretty bad and is just compounding the imbalances in the world economy.
CHADWICK: John, that glass isn't half empty. It's practically overflowing. What is it that skeptics are looking at here? What do they think could happen?
DIMSDALE: Well, they think that, you know, with all this debt, Americans will start spending less as their debts come due. Foreign investors will lose confidence in the US and take their profits elsewhere. The US would have to raise interest rates to try to keep that foreign investment here; that means companies wouldn't be able to afford to expand, families can't buy new houses. The result is fewer jobs and less economic growth. And that may explain why gold--the price of gold yesterday hit $500 an ounce...
DIMSDALE: ...which is an 18-year high. So, you know, that's the refuge for investors who are getting cold feet about the economy.
Coming up later today on "Marketplace," we're looking at a new study of travel by White House officials that's paid for by federal contractors, lobbyists and other non-governmental organizations.
CHADWICK: Thank you, John. John Dimsdale of public radio's daily business show "Marketplace," produced by American Public Media.