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By Jeremy Glaser | 10-29-2010 11:21 AM

Highlights and Lowlights in the GDP Report

Increased spending on consumer services is a very positive sign for the economy, but imports continue to be a headwind to GDP, says Morningstar's Bob Johnson.

Jeremy Glaser: For Morningstar.com, I'm Jeremy Glaser. GDP growth clocked in at 2% in the third quarter, driven by a better-than-expected consumer. I'm here with director of economic analysis Bob Johnson to take a deeper look.

Bob, thanks for talking with me today.

Bob Johnson: Great to be here.

Glaser: So anything that surprised you: Was the consumer, that number really great this quarter?

Johnson: I was really pleased with the number. At 2.6% growth for the consumer, which is 70% of GDP, that was a very good number, and that's been trending up for several quarters now, so that number was really good, because you can have growth in exports, you have growth in productivity, and other things happening, but what really drives the economy overall is what are consumers spending, and I think today's number was a very good number.

Glaser: Consumers, we've been worried about them with unemployment so high and wage growth looking like it was stagnating or even moving backward. What do you think got people spending again in the quarter?

Johnson: I think, well, certainly, near the end of the quarter, we had better markets and that may have helped a little bit. People may have felt more confident that they weren't going to be the ones that are going to be laid off. So I think it was probably a little bit of improved confidence on the part of the consumer there that helped them decide to spend a little bit more of their income.

And it's interesting how they have been spending it, too. What's been driving the economy early on was the fact that they were buying goods, and that was the big driver. Even though that's a smaller part of the economy, and less so on services. And this time around, the services growth was a bigger contributor to the GDP growth than goods, and I think that's a very positive sign for the economy going forward.

Glaser: Now that's something I know you've been looking for, for a while. Now that services are doing better, should we just kind of ignore manufacturing, or is it still something that's going to be key to the recovery?

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