2% GDP Growth In Third Quarter of 2010 Means Nothing Good

Jillian Bandes | October 29, 2010 10:38 AM

It's only slightly higher than the second quarter, and is an astronomically slow rate given what we need to make up for the losses incurred during the recession. It does indicate that we're on an upward trend, but that trend is nothing to crow about.... a 2% GDP growth won't do anything for the 9.6% unemployment rate.

Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, tells Forbes that the 2% growth rate is even lower than it seems because of a buildup in inventories:

Heavy discounting boosted consumer buying but production gains outpaced consumption and investment, so inventories have increased. Reducing those inventories in Q4 will require still more discounting plus some scaling back in production.

The Conference Board estimates 2% growth in the fourth quarter — other estimates have it as high as 2.4% — but either one of those figures would mean the economy will be weaker at the end of the year than it was at the beginning.