The US economy continues to grow at a lackluster pace. Indeed, since Q3-2009, when the recovery started, through Q3-2012, real GDP is up just 7.2%, weaker than all of the previous six recoveries, which had an average gain of 15.8% over the comparable 13-quarter period. Real consumer spending is up 7.4% during the current recovery, also weaker than the previous six and well below their average gain of 14.5%.
The negative spin on this subpar growth from the Bear camp is that it’s very close to “stall speed.” So they’ve been predicting a “double-dip” recession ever since the bull market started in March 2009. Now they are licking their chops about the fiscal cliff, which will certainly cause a recession, if it isn't averted.
I have spotted a few “soft patches” in the economy during the latest recovery, but insisted that GDP would continue to grow. Now I am predicting a “Second Recovery” for the US in 2013, led by housing and autos. I see lots of pent-up demand that could boost growth next year. I think this could happen no matter who wins next Tuesday.
Admittedly, I feel more strongly about this outlook if Romney beats Obama. As discussed on Monday, I think this is a likely outcome despite the neck-and-neck polling results. However, in either case, the lame-duck Congress will probably pass an omnibus bill postponing all aspects of the fiscal cliff for one year. Postponing it for a shorter period would pose a nightmare for the IRS and for taxpayers having to prepare their 2013 returns with two different tax rates. For now, the fiscal cliff is already weighing on the economy.
The 2.0% (saar) increase in real GDP during Q3 was better than Q2’s meager gain of 1.3%. However, the latest quarter’s growth was boosted by a 9.6% increase in federal government spending, mostly on defense. Without that contribution, real GDP would have been up only 1.3%. Needless to say, the stall-speed crowd was fast to make this point when the numbers were reported on Friday.
Today's Morning Briefing: Income Issues. (1) Greetings from MiFi. (2) Will next jobs report help or hinder Obama’s bid? (3) GDP still growing at “stall speed” without stalling. (4) Regional business surveys weak in October. (5) Household and median incomes stagnating, while pay per worker rising. (6) There’s no standard to the standard of living. (7) Can Washington really help the middle class? (8) Unintended consequences of government support. (More for subscribers.)