INSTANT VIEW: GDP up 3.5 percent; jobless claims fall

NEW YORK (Reuters) - The U.S. economy grew in the third quarter for the first time in a year as consumer spending and investment in new home-building rebounded, data showed on Thursday, unofficially ending the worst recession in 70 years.

KEY POINTS: * The Commerce Department, in its first estimate of third-quarter GDP, said the economy grew at a 3.5 percent annual rate, the fastest pace since the third quarter of 2007, after contracting 0.7 percent in the April-June period. * The growth pace in GDP, which measures total goods and services output within U.S. borders, was above market expectations for a 3.3 percent rate. The economy last grew in the second quarter of 2008. * Recessions in the United States are dated by the National Bureau of Economic Research and the private-sector group often takes months to make determinations. The economy slipped into recession at the end of 2007. * The third-quarter recovery was generally broad-based. Consumer spending, which accounts for over two-thirds of U.S. economic activity, surged at a 3.4 percent rate in the third quarter, the fastest advance since the first quarter of 2007.

JOBLESS CLAIMS:

The number of U.S. workers filing new claims for jobless benefits dipped by 1,000 last week, while the number collecting long-term aid fell to the lowest reading in seven months.

COMMENTS:

TIM GHRISKEY, CHIEF INVESTMENT OFFICER, SOLARIS ASSET MANAGEMENT IN BEDFORD HILLS, NEW YORK:

"The futures have reacted predictably, very strongly and we are at least going to start the market out making up part of yesterday's losses.

On the Fed: "We don't think this GDP report tips the scale yet. We don't think the Fed is anywhere ready to raise rates. The Fed will only start raising rates once it feels the economy is on solid footing, and has the potential to become speculative, where inflation might become an issue, and we are a long way away from inflation becoming an issue. So we firmly believe the Fed will remain on the sidelines and be more of a cheerleader for this economy rather than trying to put out a fire."

NIGEL GAULT, CHIEF U.S. ECONOMIST, IHS GLOBAL INSIGHT, LEXINGTON, MASSACHUSETTS

"We saw clear improvement on the foreign trade side, I'm not talking about the contribution to GDP, I'm talking about the fact that both exports and imports were up strongly, which is a big indication of trade activity coming back.

"There's still a question of how long you can sustain growth at this sort of rate. My guess is we might do it in the fourth quarter, but we're probably going to have some slowdown when we get into the first half of next year.

"We've had an initial bounce from an exceptionally low level... So, good news that we've bounced, and quite possibly the fourth quarter will be another decent quarter. But we got to still be concerned as we go into 2010 that we still are working through the after-affects of this financial crisis.

"We've still got to work through another what's likely to be major downturn in commercial real estate. We're still working our way through out of a deep hole, but I think it's going to be a very long process to digging out of this."

CARY LEAHEY, ECONOMIST, DECISION ECONOMICS, NEW YORK:

"The GDP report was what people expected as of a week ago, but since then everyone had lowered their forecast.

"There are two important aspects of this report. One is that consumer spending was artificially strong in the third quarter, up 3.4 percent, because of the cash-for-clunkers auto buying incentive program, because of spending related to home buying linked to the new home-buyers tax credit, and due to a drop in the savings rate.