The U.S. Gross Domestic Product has shown positive change from June through September, according to a study issued Thursday by the U.S. Department of Commerce.

Business spending and consumer confidence in the economy contributed to the jump in the GDP, which grew by more than 4 percent during the three months. Overall, the GDP has increased by 7.2 percent thus far in 2003.

The gross domestic product is the total value of all goods and services produced within a country during a specific period of time.

James McGibany, associate professor of economics, said continued low interest rates and tax rebates that many people received from the federal government encouraged consumer spending and helped stimulate the economy.

“Lower interest rates mean less out-of-pocket expense when we buy so-called ‘big ticket items,’ and many people refinanced their mortgages, (which allowed) for spending elsewhere,” he said.

Americans put their savings to good use. McGibany said many took advantage of their extra dollars, spending more and pumping money back into the economy.

“Consumers had more confidence in the economy during the third quarter than was the case very early in the year, and this means we are more likely to make purchases,” he said.

McGibany said the lower interest rates also allowed businesses to spend more on investments to their company. Previous reluctance to doing so was a major contributor to the recession.

“A big part of the economic slowdown has been very sluggish business spending on capital goods,” McGibany said. “Finally, lower interest rates, which have kept interest or borrowing cost down, were coupled with the outlook of improved revenue.”

The increase in profits allowed businesses to purchase newer machinery and update their workplaces technologically.

The number of U.S. exports has also increased considerably, which contributed to the growth of the GDP.

“The dollar has dropped in value relative to other currencies,” McGibany said. “This makes our exports relatively less expensive.”

Farrokh Nourzad, associate professor of business economics, agreed that fiscal policy concerning tax cuts has been a major factor in greater consumer spending power and the increase in the GDP.

“The Federal Reserve has been pursuing an expansionary monetary policy for quite a while now and as a result interest rates are very low, making it easier for households and businesses to spend on credit,” he said.

But according to Gene Smiley, professor of economics, increased consumer spending may not be the factor primarily responsible for the country’s economic growth.

“The tax cuts and the monetary expansion that resulted in low interest rates certainly have had some affect in the increased rate of economic activity, but these have been in effect for some time and it is hard to attribute the timing to those macroeconomic policies,” he said.

Smiley said business expansion and rebuilding are stronger indicators of the economic upswing.

“Firms have begun the process of rebuilding inventories and initiating some investment that has been postponed for several years,” he said. “Generally, in many industries, firms have finally begun to adjust prices and production to the changed demands and the cost-cutting has begun to pay off so that they are more profitable.”

Though the report is not specific enough to record economic growth in individual American cities, Nourzad said a national increase usually indicates growth at state and local levels.

“Generally speaking, when the national economy performs better, state and local economies follow suit,” he said.

Though increases in state and local markets are heavily dependent on the composition of their economies, Nourzad said a national increase generally suggests positive growth in smaller markets.

McGibany said the best indicator of local economic growth is to examine Milwaukee’s unemployment rates. Though the city and state unemployment rates were lower than the country average in 2001, they are now both equal to national numbers.

The Wisconsin unemployment rate now stands at 5.5 percent, according to numbers released by the Federal Deposit Insurance Corporation.

“You can say that we have fared somewhat worse than the rest of the country, especially in the job market,” McGibany said. “One reason for that is that we are still fairly tied to manufacturing, at least in the state, and the recession was due in large part to less business spending on goods our manufacturers tend to make. That made our state a bit worse off, relatively speaking.”

Several prominent Milwaukee firms, including Harley-Davidson Inc., Briggs and Stratton Corp., and General Electric Co., sell in the national market. As economic activity across the country increases, demand for products and services in Milwaukee will grow as well, thus contributing to a growth in the local economy.

The GDP is expected to continue to increase during the coming months, Smiley said. He expects as much as 3 or 4 percent in growth.

“It looks as if the economy is finally shaking off the negative impacts of the recession that took place during 2001,” McGibany said. “Slow business spending kept us in the doldrums for some time, but usually once that trend starts up, it continues for some time.”

Nourzad agreed.

“Barring unexpected shocks, in the near future GDP should continue to rise, perhaps not at 7 percent but most likely at a lower yet healthy rate,” he said.