Economic news for most of the past three years has been gloomy, but there are healthy signs that a recovery is underway. In fact, if a recovery has begun we may look back on October 2011 as the starting point.
Stocks rallied about 340 points yesterday on the New York Stock Exchange, which by itself means little since the stock market has provided plenty of volatile trading sessions in recent months. But yesterday’s rally put October’s market gain at 14 percent and erased previous losses during 2011. In fact, as of Wednesday’s close, October had produced the biggest monthly rally since 1974.
Couple that with yesterday’s news that the U.S. Gross Domestic Product, the broadest measure of economic health, grew at a 2.5 percent annual rate in the third quarter after adjusting for inflation. That pace is nearly double the recorded GDP for the second quarter. Second quarter GDP was 1.3 percent, and the first quarter’s GDP was an anemic 0.4 percent.
Analysts say stronger consumer spending was a key factor in GDP growth during the third quarter, and most now believe the danger is past for a double-dip recession for the U.S. economy.
Yet economists would like to see additional signs that America is climbing out of the economic doldrums. The 2.5 percent GDP growth rate in the third quarter is below average during an economic recovery, and looks good because it is compared with the weak first half of 2011. Economists would prefer to see growth of 3 percent or better if businesses are to start hiring workers again.
Yesterday’s stock rally was due largely to investors and traders showing approval of news that European leaders agreed to expand a bailout fund to stem the region’s debt crisis.