Center for Business and Economic Research - Ball State University


CBER Data Center
Projects and PublicationsEconomic IndicatorsWeekly CommentaryCommunity Asset InventoryManufacturing Scorecard

About

Commentaries are published weekly and distributed through the Indianapolis Business Journal and many other print and online publications. Disclaimer

RSS Feed

Disclaimer

The views expressed in these commentaries do not reflect those of Ball State University or the Center for Business and Economic Research.

Recent

Two Key Economic Lessons in One BillHoosiers face trade-offs and opportunity costs in the wake of SEA1.

Time to Fix Economic Development PolicyAllocating tax dollars to land development won’t cause economic growth.

The Unanticipated Effects of SB1Businesses, governments and households may all feel the effects.

The Stupidest of PoliciesThis whipsawing of tariff rates has unnerved financial markets, which on Wednesday, were toying with a liquidity crisis.

View archives

Top Tags

jobs and employment 261
economics 201
state and local government 188
education 186
economic development 171
indiana 171
budget and spending 145
taxes 144
law and public policy 142
workforce and human capital 139
Browse all tags
Reporter / Admin Login

October 31, 2003

Now That's What I Call Growth

In the midst of the ever-lengthening American political season, it can be hard to get an objective assessment of anything.  But for those who continue to put a negative spin on economic news, the release of the third quarter Gross Domestic Product (GDP) statistics for the national economy poses a question.  That is, if the economy is in such terrible shape, why are consumers and businesses spending like sailors?

The news that the overall economy grew at a blistering 7.2 percent annual rate during the months July through September effectively closes the book on the 2001 recession.  Stories about economic malaise and widespread hardship are so far out of whack with the facts on the ground that they should remain on the cutting room floor.

That doesn't mean the economy is in perfect health, by any means.  The economy has seen ups and downs in growth since the recovery began, and few of us will truly relax until we have a few months of solid job growth behind us.

But one thing we don't have to worry about is the recovery itself.  The stimuli of low interest rates, strong money supply growth, and deficit spending by Congress have kicked almost every kind of economic activity up a notch.

Consumer spending, in particular, broke out in a big way.  Led by a whopping 26.9 percent runup in spending on durables, household spending grew faster in the third quarter than anytime in the past six years.  Other indexes notwithstanding, this is the ultimate measure of consumer confidence.

Businesses are also bullish about our future economic prospects, based on their two-fisted investment spending. After more than two years in the toilet,nonresidential investment is getting back in the groove, and for Indiana , it’s not a moment too soon.  Empty order books for capital equipment have pushed many manufacturers here to the edge of their existence, but the third quarter's 11.1 percent gain -- the first double-digit growth in three years -- will put a bit more air in their sails.

Even the trade sector got into the high-flying act.  Buoyed by the weakening dollar, exports turned in their best performance in more than a year, growing at a very healthy 9.3 percent rate.  On the other side,imports were stagnant, which meant that domestic producers of goods and services felt the full brunt of the increased spending.

If the third quarter GDP report proves anything, it is that businesses and consumers alike have placed their bets on a growing economy.  But it also establishes something that is equally important -- the days of stagnant job growth will soon be over as well.  The economy simply cannot sustain the recent increases in productivity that have helped perpetuate what has come to be known as the jobless recovery.

The behavior of inventories in the most recent GDP release underscores that point.  Higher sales levels require higher inventories, yet in the same quarter that the economy broke out of its rut, inventories actually fell economy-wide.  That puts the gun to producers' heads to find a way to replenish their stocks and meet surging demand at the same time.

From an Indiana perspective, this is good news as well.  The challenges that face our economy won't be washed away by a single quarter of growth in the national economy, of course.  But it is much easier to address them with the U.S. economic growth engine started than when it is stalled.

Link to this commentary: https://commentaries.cberdata.org/347/now-that-s-what-i-call-growth

Tags: economic development, economic recovery


About the Author

Pat Barkey none@example.com

Patrick Barkey is director of the University of Montana Bureau of Business and Economic Research. He served previously as Director of the Bureau of Business Research (now the Center for Business and Economic Research) at Ball State University, overseeing and participating in a wide variety of projects in labor market research and state and regional economic policy issues. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

© Center for Business and Economic Research, Ball State University

About Ball State CBER Data Center

Ball State CBER Data Center is one-stop shop for economic data including demographics, education, health, and social capital. Our easy-to-use, visual web tools offer data collection and analysis for grant writers, economic developers, policy makers, and the general public.

Ball State CBER Data Center (cberdata.org) is a product of the Center for Business and Economic Research at Ball State University. CBER's mission is to conduct relevant and timely public policy research on a wide range of economic issues affecting the state and nation. Learn more.

Terms of Service

Center for Business and Economic Research

Ball State University • Whitinger Business Building, room 149
2000 W. University Ave.
Muncie, IN 47306-0360
Phone:
765-285-5926
Email:
cber@bsu.edu
Website:
www.bsu.edu/cber
Facebook:
www.facebook.com/BallStateCBER
Twitter:
www.twitter.com/BallStateCBER
Close