U.S. economy: Parsing today’s GDP report

Sighs of relief. High fives. Hip hip hoorays.

That was the general reaction to today's news that the U.S. economy — the world's largest — grew at an annual rate of 2.5 percent in the third quarter.

That number is double the 1.3 percent rate in the previous quarter, and is the fastest growth this year.

In fact, the U.S. economy is now back at the level that it was prior to the Great Recession. 

Here's how the Commerce Department explained the rise in today's news release:

The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, and federal government spending that were partly offset by negative contributions from private inventory investment and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The Wall Street Journal's Real Time Economics blog collected some quick economist reactions from Wall Street banks and beyond. Here's a sample:

Broad based gains indeed with consumer spending, business investment, structures and residential investment up… Modest growth, no recession, still a slow paced recovery but recovery nonetheless. –John Silvia, Wells Fargo

Where are the recession calls now? In the middle of the third quarter, there were cries that growth was stalling and the economy was slipping into recession. It turns out that (on the first go at adding up the numbers) growth was 2.5%. More importantly, the details of the report were stronger. –RDQ Economics

As long as the inventory figure stands, the stage is set for a strong fourth quarter. At this point, it seems that inventories may stay lean in the fourth quarter, as retailers are playing things close to the vest heading into the holidays and may end up running out of merchandise before Christmas. Nonetheless, the bar is now awfully low for another quarter of real growth running at or above trend, a stark departure from the first half of the year. Without having gone through the forecast rigorously, my initial impression is that I will be looking for fourth quarter real GDP growth of at least 3%. –Stephen Stanley, Pierpoint Securities

In the wake of the third-quarter GDP figures, it now looks like the fourth quarter is ruining closer to +3.0%. A complete reversal of the quirk in the motor vehicle figures could push it even higher. Still, we believe that much of the improvement in GDP growth during the second half of 2011 reflects temporary factors and the performance of the labor market will be critical to sustaining some forward momentum in economic activity into 2012. –David Greenlaw, Morgan Stanley

While the U.S. economy overall strengthened in the third quarter, that's not the case on a person-by-person basis.

See this great graph from the Commerce Dept. that shows GDP per capita is almost 3 percent below its pre-recession high:

For more from Thomas Mucha on Twitter: Follow @thomaswmucha