Business

Economy Grows For 3rd Quarter In A Row

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Slightly below economists’ estimates of 3.3%, but 3.2% isn’t anything to sneeze at.

And while this Q1’s growth was smaller than Q4’s 5.6%, CNN Money explains why these numbers might be more important to our long term economic outlook:

In the fourth quarter, most of the growth was due to businesses no longer making the deep cuts in inventories that they had made early in 2009 when they were concerned about a sharp fall-off in demand. But the rise in consumer spending was fairly modest in the fourth quarter, increasing at only a 1.6% annual rate.

This time inventories made only a modest contribution to growth but spending by households grew at a 3.6% annual rate, and accounted for the overwhelming majority of the improvement in the economy.

For an economy based on consumer spending…this is a good sign. Because if people don’t buy things, the economy won’t recover.

Now folks have the confidence that they’re not going to lose their job tomorrow so their wallets and purses are opening up.

Here’s a graphic detailing how much compared to other months these past two years…

Still, there are some challenges…

Investment in residential real estate fell nearly 11%, ending a two-quarter rebound in that battered sector and subtracting from overall growth. And commercial real estate investment dropped at a 14% rate, although that was a slower pace than in the fourth quarter.

Still, the economy is improving, yes? Can we all agree on that at this point?