By CountingPips.com
The U.S. economy expanded by more than expected in the 3rd quarter of 2009 and brought an end to the deep recession according to a release by the U.S. Commerce Department. The advance estimate report released today showed that the U.S. Gross Domestic Product grew at an annual rate of 3.5 percent in the July to September quarter following a real 0.7 percent contraction in the 2nd quarter. The GDP numbers surpassed economic forecasts expecting 
growth of 3.2 percent. The economy declined by 6.4 percent in the 1st quarter and had contracted for four straight quarters before today’s news. This was the best quarter for U.S. GDP since the 3rd quarter of 2007 (3.6%) and is the clearest sign yet that the economy is turning the corner from the worst recession since the 1930’s.
Contributing largely to the gain in GDP for the 3rd quarter was an increase in consumer spending which makes up approximately two-thirds of U.S. economic activity. Consumer spending jumped by 3.4 percent in the quarter after decreasing by 0.9 percent in the 2nd quarter and marked its largest gaining quarter since the 1st quarter of 2007. Durable goods purchases surged by 22.3 percent for the quarter after a decline of 5.6 percent. Consumer spending and durable goods purchases were boosted by the government’s “Cash for Clunkers” program and the housing tax credit.
Exports also contributed positively to the GDP numbers as exports of goods and services increased by 14.7 percent in the quarter after falling by 4.1 percent in the 2nd quarter, the last of a string of four declining quarters. Imports advanced in the 3rd quarter by 16.4 percent following a decline of 14.7 percent in the 2nd quarter. Gross private domestic investment showed a gain by 11.5 percent in the 3rd quarter after falling for seven consecutive quarters.
The advance estimate GDP data is subject to revision as the 2nd estimate version is released at a later date and is scheduled for November 24th 2008.
US Dollar falls on risk taking after GDP news.
The US Dollar has been on the defensive today in forex trading against the other major currencies as investor’s increased risk appetite has pushed the American currency lower and the stock markets higher. The dollar has been losing ground to the euro, British pound, Australian dollar, New Zealand dollar, Swiss franc and the Canadian dollar while edging up versus the Japanese yen at 2:13 pm EDT in the afternoon of the US trading session according currency data by Oanda.
The US stock markets, meanwhile, have surged higher today on the GDP news with the Dow Jones gaining by over 150 points, the Nasdaq increasing over 30 points and the S&P 500 advancing by over 17 points at the time of writing. Oil has traded higher to around $80.29 while gold has also advanced by $13.00 to trading around the $1043.00 per ounce level.
EUR/USD Chart – The Euro gaining today versus the US Dollar as the positive GDP news has spurred risk taking and dollar weakness. The Euro had fallen for the past three days in a row.
