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Gross domestic product up

U.S. currency is seen in this January 30, 2011 photo in Manassas, Va.

Bob Moon: Wall Street was downright euphoric today, and not just over the improving outlook in Europe. Our Gross Domestic Product is looking better, too. That's the way we measure overall economic activity, goods and services, manufacturing, housing costs, government spending. Lump all that together, and it turns out GDP was up 2.5 percent in the third quarter -- twice the growth eked out the quarter before.

But still, not enough to make an appreciable dent in unemployment. And last quarter's growth came at some cost. Marketplace's John Dimsdale explains.


John Dimsdale: Americans went shopping this summer. Spending increased a healthy 2.4 percent, which is amazing in the face of a simultaneous drop in income, continuing high unemployment and pessimism about the future.

David Wyss: I think Americans are sort of getting tired of being so frugal.

Brown University's David Wyss says consumers spending money -- even when it means dipping into their savings -- is just what the economy needs. At least for the time being.

Wyss: But in the long run, well, that's what got us into this mess. We were living beyond our means during the last decade, and we don't want to get into that trap again. So it's trying to tread this fine line between short-term need for stimulus and long-term need for prudence.

How long can shoppers keep shelling out more than they earn? Standard & Poor's economist Beth Ann Bovino says since the recession, Americans got rid of a lot of credit card debt and began saving, socking away twice as much. She thinks that'll continue.

Beth Ann Bovino: So it does look like while we are spending a bit more, people are very aware of what's in their balance sheets and I don't think they're going back to the go-go days.

Businesses are beginning to respond to the new consumer demand. Investments in new plant and equipment grew more than 16 percent last quarter. David Wyss expects demand to stay strong, especially if oil prices fall.

Wyss: Money spent at the gas pump is money you can't spend at the department store. So, during the fourth quarter, hopefully we'll be spending a little less at the gas pump.

Which means, he says, you should be hearing less talk about a double-dip recession.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.
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"Which means, he says, you should be hearing less talk about a double-dip recession."...speaking of the devil. So proud of yourself aren't you Marketplace?

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