Last week, the Commerce Department upwardly revised its initial estimate for the rate of economic growth in the third quarter from 2.9% to 3.2%, which was the strongest rate of quarterly growth in two years. This news looks encouraging, as presented in the chart below, especially since it follows several quarters of sub-2% growth. Wall Street and the financial press were both quick to shelve the idea that the recovery might be stalling, emboldened by what they view as a strengthening consumer. Yet if they had looked beyond the headline number and lifted up the hood of this report, they would not have been as enthusiastic.
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For starters, if we look at the year-over-year growth rate for the third quarter, it presents a much different picture than the annualized growth rate in the third quarter. It is just 1.6%, which is the weakest quarter of growth over…