Release Date: October 29/09
Q2 Result: -0.7% Q/Q ann.
TD Forecast: 3.8% Q/Q
Consensus: 3.0% Q/Q


The third quarter of 2009 will in all likelihood mark the emergence of the U.S. economy from the longest and deepest recession in the post-war period. At 3.8% (annualized), the return to positive growth is expected to be substantial. The main pillars of growth will be a rebound in consumer spending, business inventory investment and residential construction investment. Aided by fiscal stimulus and cash-for-clunkers legislation, spending on automobiles skyrocketed in August, and while spending fell back in September on the expiration of the government program, other areas of consumer spending continued to hold up. The emergence of the U.S. automakers from bankruptcy was also important in returning growth to positive territory, and automobile production likely added close to 1.5 percentage points to growth in the quarter. Finally, the rebound in U.S. housing starts that took place mainly through the second quarter of this year implied more hammers and saws were put to work through the third quarter. On the negative side, fixed business investment (excluding inventories) continued to flounder in the quarter. Non-residential structures investment in particular saw another quarter of deep decline and is unlikely to rebound any time soon.