Oct 27, 2011 10:09
The U.S. economy this summer grew at its fastest pace in over a year, the Commerce Department reported Thursday, confirming trends that financial information company Sageworks Inc. has seen for months among privately held companies.
The government said gross domestic product increased at an inflation-adjusted rate of 2.5 percent between July and September, following 1.3 percent growth in the second quarter and 0.4 percent growth in the first quarter.
“The most recent GDP gain indicates that the economy is recovering at a healthy rate, and it is consistent with what is happening with privately held companies, whose revenues have shown consistent growth over at the least the past 12 months,” said Brian Hamilton, CEO of Sageworks.
Sageworks’ analysis of financial statements from private companies within all industries shows that revenue has increased about 7 percent so far this year, compared with a roughly 4 percent increase for 2010 and a 6 percent decline in 2009.
Source: Sageworks, Inc.
“Private company revenue constitutes the largest component of GDP,” Hamilton said. “We don't know what will happen in the future, but we do know that revenue quality in the overall economy and in privately held companies is the most important metric to watch over time when assessing the true strength of the US economy since revenue drives most other major metrics.”
Private companies account for up to 70 percent of GDP and 80 percent of new jobs.
Sageworks’ financial statement analysis has also found that net profit margins for privately held businesses have risen this year. They are up about 7 percent, compared with a 5 percent increase in 2010 and a 4 percent gain in 2009.
The Commerce Department said accelerated consumer spending drove the pickup in real GDP growth.
“An upturn in durable goods mainly reflected a smaller decline in motor vehicles and parts, and a pickup in services mainly reflected spending for housing and utilities and for health care,” the department said.
Real personal consumption expenditures increased 2.4 percent, compared with a 0.7 percent increase in the second quarter. Durable goods spending swung to a 4.1 percent increase from a 5.3 percent decline in the second quarter, while spending on services gained 3 percent, up from 1.9 percent growth earlier this year.
Americans’ personal saving rate, or saving as a percent of disposable personal income, declined to 4.1 percent from 5.1 percent in the second quarter, according to the government report Thursday.
Meanwhile, business investment in equipment and software jumped 17.4 percent.