Economy grew at modest 2 percent rate in third quarter

In the last major bit of economic news before a midterm election dominated by concerns about the economy, the Commerce Department reported gross domestic product grew at a 2 percent annual rate on increased consumer spending. 

Democrats hailed the news as evidence that their actions have helped the economy, while Republicans criticized the sluggish growth. 

“As a result of actions taken by Congress, the economy has now experienced five consecutive quarters of positive GDP growth,” said Rep. Carolyn Maloney (D-N.Y.), chairman of the Joint Economic Committee. “No matter which data you look at, it’s clear that we’ve come a long way in 15 months and the economy is in better shape than it was in mid-2009.”

Rep. Dave Camp (R-Mich.), who is slated to become chairman of the House Ways and Means Committee if Republicans take back the House, called the figures disappointing and said the “so-called stimulus bill” failed to create jobs. 

“Given the Administration’s expansion of government, funded by a massive run-up in deficit spending and with a looming $3.8 trillion tax hike just two months away, it is no wonder businesses large and small are frozen by uncertainty and are holding back,” he said in a statement. 

The nation’s unemployment rate stands at 9.6 percent. 

GDP is the output of goods and services produced by labor and property. The growth between July and September was within economists’ estimates. 

Consumer spending rose at an annual rate of 2.6 percent, up slightly from the second quarter. Fixed investment (nonresidential structures, equipment and software, and housing investments) grew at an annual rate of 0.8 percent. 

In addition, investment by businesses in equipment and software increased by 12 percent, the fourth consecutive quarter of growth, indicating continued expansion of investments by private firms. Businesses increased their inventory investment by 1.4 percentage points, slightly less than the average in the last four quarters. 

“As was the case last quarter, imports outweighed exports, dragging down GDP and indicating that more actions are needed to strengthen our manufacturing base and boost exports,” Maloney said. 

The White House used the slow growth to push for a package of stimulus measures, including the extension of middle-class tax cuts, a debate set to occur when Congress returns next month for a lame-duck session. 

“It is essential that we take the additional targeted actions that the president has recommended to further stimulate growth and job creation, such as extending tax cuts for the middle class, investing in our infrastructure, providing tax incentives to encourage businesses to invest here at home, and promoting exports abroad,” said Austan Goolsbee, the chairman of the Council of Economic Advisers, in a blog post this morning.