WASHINGTON, Oct. 29 (UPI) -- Economic growth in the third quarter wasn't as robust as it earlier in the year, but that hasn't stopped the Bush administration from arguing that the U.S. economy is much better now than it was than when the president first took office. But taking advantage of the fact that the latest GDP data release is the final economic indicator to come out before Tuesday's elections, the Democratic campaign stepped up its rhetoric about the Republicans' inability to steer the economy in the right path.
The truth, according to most economists, is somewhere in between, as the economy is strengthening but faces downside risk moving forward, especially as oil prices continue to rise and there is growing concern about a slowdown in growth worldwide.
The Department of Commerce reported early Friday that the nation's gross domestic product grew at an annualized rate of 3.7 percent between July and September, above the 3.3 percent growth rate posted in the second quarter, but short of the 4.5 percent it reached in the first three months of the year. The third quarter results also were below the consensus among Wall Street analysts who on average expected the rate to reach around 4.3 percent.
Still, U.S. Treasury Secretary John Snow insisted that the administration was "encouraged by the ongoing strong performance of the American economy, with a non-inflationary growth rate that is above the average for the past ten years. GDP continues to grow above the average of the 1970s, 80s, and 90s, while the unemployment rate remains below the average for those decades."
Commerce secretary Don Evan echoed Snow's assessment, as he said that the latest GDP figures "again prove the U.S. economy is the fastest-growing major industrialized economy and the world's leading exporter. President Bush's leadership has put our nation on a path of growth and opportunity."
Meanwhile, Evans said that Democratic presidential candidate John Kerry's "no-win pessimism (about the U.S. economy)...would stifle growth with higher taxes, burdensome regulations, and economic isolationism."
But Gene Sperling, chief economic advisor to the Kerry campaign and former White House chief economist under the Clinton administration, said that third quarter economic growth was "disappointing for middle class families and below expectations."
"With lost manufacturing jobs, anemic private sector job growth, three straight months of declining consumer confidence and spiraling oil prices, most middle-class families will find it hard to swallow the Bush administration's spin that this is the best economy of our lifetime," Sperling added.
The former head of the Council of Economic Advisors at the White House concluded that the latest GDP data make it "official that President Bush is the first president since the 1930s to preside over declining real exports and business investment during his term."
Joel Naroff, chief economist at Naroff Economic Advisors, was more favorable towards the upbeat assessment by Snow and Evans, stating that "while (3.7 percent) was a touch below expectations, it is still a very good performance. The gains were broad-based. Households hit the vehicle showrooms really hard and motor vehicle sales added almost one full percentage point to growth."
Meanwhile, Brian Wesbury, chief economist at Griffin, Kubik, Stephens & Thompson, said that "some will try to spin (Friday's) report as a sign that the economy is slowing. We could not disagree more."
But Naroff warned that while robust car sales and solid consumer spending are unlikely to be sustainable in light of the number of downside risks.
Indeed, while economists generally reacted favorably to the latest GDP figures, and financial markets were unfazed by the results, there is nonetheless deepening concern about economic growth potential in coming months.
"The overvalued dollar and trade deficit, rising oil imports and prices, and rapidly escalating health care costs, are taxing jobs creation and investment. Those are keeping the economy from accomplishing its potential rate of growth of about 4.5 percent," said Peter Morici, an economics professor at the University of Maryland.
Morici added that the lackluster performance of the stock market in general in recent months "reflects well-place investor pessimism about the direction of profits and the economy. Those are not irrational expectations."
Meanwhile, Naroff cautioned that "there is likely to be a softening in durable goods spending and a moderation in investment and so fourth quarter growth should be slower than the third quarter. If that happens, the markets will not take the slowing trend lightly."