GDP grew by 3.5% in the third quarter of 2009, beating the general consensus estimate of 3% and essentially putting an end to the recession (although that won't come officially from NBER for a while, they will almost invariably date the end of the recession to some time in Q3 2009).
Q3 GDP Report
Now, we need to examine a few things from this report to determine its overall strength. First, Cash for Clunkers played a huge role, as motor vehicles added 1.66 points to the Q3 GDP, which is a one-quarter (may be 2) boost at best that will disappear unless auto sales move dramatically higher. Next, we see that private investment was a big add to the third quarter at 1.22 points added (.5 of which were from residential investment). This is a number that is likely to remain stable or grow in the future. The government's contribution really fell off, only adding about .5 to GDP after adding 1.33 in Q2 and this number in unlikely at this point to soar again since the stimulus is now steady. Finally, the exports-imports equation subtracted points again (likely due to higher oil prices).
So, what does this report tell us going forward? The answer is not a lot, as the Cash for Clunkers program (and likely the home buyer tax credit) have added a fair amount of noise to the report and at least for C4C are unlikely to have an impact again. Also, if oil prices hold around $80 (or move higher) we will be in trouble again. Finally, it will be interesting to see how much momentum is carried into the Christmas season.
As of right now, I would guess that Q4 is going to come in light due to the fall off in autos and a likely worse exports-imports equation. So, while the recession is likely going to be dated to end sometime in Q3 2009, we are not out of the woods yet and may still experience a double dip or stagnation even in the face of a nice 3.5% boost this quarter.