Trends
Overall economic trends were positive in the third quarter of 2004, continuing a pattern that has persisted since the third quarter of 2003. Real gross domestic product (GDP) increased at an annualized 3.7 percent in the third quarter. This was higher than the previous quarter and marked the twelfth consecutive quarter of positive real GDP growth. Between the third quarters of 2003 and 2004, industrial production, real gross private fixed investment, and real exports rose 4.6 percent, 14.6 percent, and 9.2 percent, respectively. Each was up significantly from their growth rates in the similar time period between 2002 and 2003.
The National Federation of Independent Business optimism index averaged 104.4 over the third quarter which, according to Advocacy research, signified strengthening small business output. Meanwhile, in September, 23 percent of small business owners believed that the next three months would be good for expansion. In the first nine months of this year, the net percentage of small business owners planning to expand employment averaged 14.7 - the highest annual percentage since 2000 - meaning that 14.7 percent more owners plan to hire than cut back on employment.
The unemployment rate fell to 5.4 percent in September, its lowest level since October 2001. The economy added 1.5 million new nonfarm payroll jobs between January and September 2004, with 309,000 being added in the third quarter. All but three major employment sectors added new workers in the third quarter. The information services, manufacturing, and retail sectors lost 74,900 employees collectively. Nonfarm business output per hour rose 3.1 percent between the third quarters of 2003 and 2004.
The Federal Reserve Board began reining in a growing economy by raising interest rates. The average of both the prime rate and interest rates for small business loans of less than $100,000 increased by 0.4 percentage points in the third quarter. Small firm demand for commercial and industrial loans remained stronger than in the previous months, according to the Senior Loan Officers' Survey. Investment by venture capital (VC) firms fell to $4.3 billion in the third quarter; however, year-to-date VC investments in 2004 exceeded the previous year's.
Inflation has been kept in check despite steep increases in the price of oil. The spot oil price of West Texas intermediate crude averaged $45.95 per barrel in September, up $7.93 from the June level. Consumer and producer prices, though, rose a modest annualized 0.6 and 1.6 percent, respectively, in the third quarter.
