Happy days are here again?

The USs real GDP grew 2% in the third quarter as compared with 1.7% in the second quarter of this year,on the back of a marginal increase in personal consumption expenditures and change in private inventories. The data may put to rest the fears of a double-dip recession in the worlds largest economy,which is slowly recovering after the worst economic downturn in decades.

The data from Bureau of Economic Analysis show that private inventory levels have gone up by 46.7% in the second quarter as compared with 24.7% in the previous one. This pileup is in anticipation that personal consumption expenditure is likely to grow more in the subsequent quarters and people would spend more. During the depth of the global economic crisis,private consumption expenditure fell by around 3.5% in the third quarter of 2008 but it has been seeing a gradual uptick since then. In the third quarter of 2010,personal consumption expenditure grew 2.6%,led up by an impressive 6.1% growth in durable goods and 2.5% growth in services.

Even on the trade front,the deficit has narrowed as exports grew 5% and imports at 17.4% in the third quarter as compared to 33.5% growth in imports in the second quarter. The federal government consumption expenditure and gross investment also increased 8.8% in the third quarter of this year as compared with 5.7% in the same quarter a year ago. Much of this rise comes from spending in national defence services that grew 8.5% in the third quarter. The question is how long private consumption can continue to grow in the face of high unemployment and declining home equity.