The third quarter U.S.-based annual gross domestic product of goods and services’ 4.1% increase over the second quarter caught the financial markets by surprise. Previous estimates, which came in piecemeal, and are usually not certified until near the end of the following quarter, had originally been estimated at 2.6%, while the second quarter “finalized” was 2.5%. Like all financial market-moving statistics, preliminary estimates can be deceiving, since the all-important inventory building, exports, and government spending are usually not known until the following quarter is practically complete.
To put third quarter results into an understandable nutshell, the July-August-September period featured strong commercial inventory building, a consumer expenditure upsurge, and more than expected state and local spending, while federal government and imports retracted. Although the third quarter obviously encouraged 2014 expectations, which I have previously projected, my preliminary analysis expects a fourth quarter relapse— still positive, but well below the third.
Contributing to the third quarter statistics were stronger than expected consumer strength, residential construction, and an expanding energy boom, about which anecdotal evidence is already indicating the “pause that refreshes.” While the automotive sub-sector will end 2013 with a pre-financial crisis flourish, consumer, as well as producer anxiety with a cantankerous government budget stand-off, put producers, as well as distributors and importers in a watch-and-wait mode during the final quarter.
While year-end holiday retail activity sagged slightly from 2012, the anticipation of Federal Reserve Board tapering also projected a negative aura over the ending of the 2013 economic year. However, an expected fourth quarter lapse will likely be succeeded by a strong first quarter 2014 takeoff for the following reasons:
1) The preoccupation with a befuddled “Obamacare” health system introduction, and an upcoming mid-term election, is putting the Administration into a defensive position. This includes further strangulating Dodd-Frank financial regulations and the Environmental Protection Agency’s attempt to block the acceleration of “fracking,” liquid natural gas exports, and the forced conversion to reverse a half dozen potential utility plant coal-powered implementation.
2) Energy development in total will be stronger than ever, supplemented by an embryonic beginning of an overdue infrastructure for oil and gas pipelines, as well as a national highway-bridges-dams system overhaul that’s decades overdue.
3) An unprecedented world-leading export sector (exceeding the previous $2.5 trillion revenues record), embellished by massive oil derivatives, is practically asured, barring Washington, D.C. interference.
While continuing unemployment will continue to restrict further comeback of consumer expenditures, even that problem will be alleviated by industrial, commercial, and residential construction already on the drawing board. These bullish expectations for the 2014 U.S. economy will become increasingly realistic, providing that some realism is understood by a federal government that will approach debt ceilings, immigration, and social issues in a way as not to deter the spectacular possibilities facing the USA today.
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