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Could It Be? Is the U.S. Still Growing?

By Matt Koppenheffer | More Articles
October 27, 2011 | Comments (2)

The big macro can cause big moves in the market. What does today's headline macro news mean for your portfolio?

What's happening: The U.S. Bureau of Economic Analysis released its "advanced" estimate for third-quarter gross domestic product today. GDP growth clocked in at 2.5% after creeping along at a lackluster 1.3% rate in the second quarter.

In plain English, please: Gross domestic product is widely used as the main gauge of economic growth, so when pundits talk about the U.S. economy growing (or not), they usually have GDP in mind.

Depending on whom you ask, economists were expecting this GDP reading to come between 2.3% and 2.7%, so the 2.5% reported was basically in line with what the market was already anticipating. While that could be a pretty ho-hum announcement, economic numbers have been disappointing enough lately that even an as-expected outcome from a major indicator like this is likely comforting to investors.

Of course it's notable that this isn't called an "advanced" reading for nothing. On Nov. 22, another reading based on a broader set of data will be released, and no doubt investors will key in on that to make sure that the first pass wasn't way off the mark.

Stocks to watch: Powering the GDP gains in the third quarter were personal consumption expenditures and nonresidential fixed investment. In particular, durable goods -- household appliances, consumer electronics, autos -- were particularly strong after a weak showing in the second quarter. Potential investable ideas on that would include Apple (Nasdaq: AAPL  ) , Ford (NYSE: F  ) , and Whirlpool (NYSE: WHR  ) . Meanwhile, with nonresidential structure spending up 13.3% in the quarter and equipment and software gaining 17.4%, investors could consider business software and equipment suppliers like Oracle (Nasdaq: ORCL  ) or EMC (NYSE: EMC  ) , or materials and construction-related companies like Cliffs Natural Resources (NYSE: CLF  ) and Caterpillar (NYSE: CAT  ) .

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The Motley Fool owns shares of Ford Motor, Oracle, EMC, and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Ford Motor. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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  • Report this Comment On October 27, 2011, at 5:02 PM, Darwood11 wrote:

    Wow, so it might not be the "end of the world as we know it." Unless, of course, you are a debt holder in the EU and one of the banks who lent Greece the money for the 2004 Olympics!

  • Report this Comment On October 28, 2011, at 3:21 PM, DJDynamicNC wrote:

    Good news coming before the holiday season. I realize anecdotal evidence is of extremely limited value, so take this with a salt mine or two, but I live in Rochester, New York, and the news for the past few months has been strictly positive - excellent job growth, increased development, long stalled projects finally getting off the ground, and so on. There is a mood of optimism around the city that has been missing the last few years. Obviously, your mileage may vary, but it's good to see here and I hope this is the first sign of similar growth occurring around the country.

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