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US economy sees stronger growth | US economy sees stronger growth |
(30 minutes later) | |
The US economy grew faster than expected over the past three months, figures have shown, recording the best quarterly performance since early 2006. | The US economy grew faster than expected over the past three months, figures have shown, recording the best quarterly performance since early 2006. |
The economy grew by 3.4% on an annual basis, bouncing back from a dismal first quarter where it grew just 0.6%. | The economy grew by 3.4% on an annual basis, bouncing back from a dismal first quarter where it grew just 0.6%. |
The figures were keenly anticipated following signs that the slump in the US housing market has been having a negative impact on the wider economy. | The figures were keenly anticipated following signs that the slump in the US housing market has been having a negative impact on the wider economy. |
The figure exceeded expectations by analysts who expected a 3.2% increase. | The figure exceeded expectations by analysts who expected a 3.2% increase. |
The data helped to calm US shares, which had fallen heavily on Thursday. | The data helped to calm US shares, which had fallen heavily on Thursday. |
'We remain strong' | 'We remain strong' |
The growth figures were welcomed by President George W. Bush who praised the "resilience" of the economy. | The growth figures were welcomed by President George W. Bush who praised the "resilience" of the economy. |
"The world economy is strong and I happen to believe one of the main reasons why is because we remain strong," he said. | "The world economy is strong and I happen to believe one of the main reasons why is because we remain strong," he said. |
Separate figures showed that consumer sentiment has also improved, although a little less quickly than many analysts had predicted. | Separate figures showed that consumer sentiment has also improved, although a little less quickly than many analysts had predicted. |
According to Reuters and the University of Michigan, their consumer sentiment index was 90.4 in July, up from a 85.3 in June. | According to Reuters and the University of Michigan, their consumer sentiment index was 90.4 in July, up from a 85.3 in June. |
This report says the economy is OK Rudy Narvas, 4 Cast Limited | This report says the economy is OK Rudy Narvas, 4 Cast Limited |
However, the growth figures from the Commerce Department indicated a further deterioration in consumer spending between April and June and continued weakness in the housing market. | However, the growth figures from the Commerce Department indicated a further deterioration in consumer spending between April and June and continued weakness in the housing market. |
The rate of growth in consumer expenditure slowed to 1.3% from 4.2% earlier in the year, reflecting growing caution among households about the economic outlook. | The rate of growth in consumer expenditure slowed to 1.3% from 4.2% earlier in the year, reflecting growing caution among households about the economic outlook. |
Investment in house building fell 9.3% on an annual basis, although the fall was less severe than the 15.8% decline seen in the first quarter. | Investment in house building fell 9.3% on an annual basis, although the fall was less severe than the 15.8% decline seen in the first quarter. |
General economic activity was boosted by strength in business investment, government spending and rising exports. | General economic activity was boosted by strength in business investment, government spending and rising exports. |
At the same time, core consumer prices - excluding food and energy - rose by 1.4% over the period, their slowest quarterly rate of growth since 2003. | At the same time, core consumer prices - excluding food and energy - rose by 1.4% over the period, their slowest quarterly rate of growth since 2003. |
Market reassurance | Market reassurance |
Analysts said the figures should give some reassurance to volatile equity markets. | Analysts said the figures should give some reassurance to volatile equity markets. |
"There are an awful lot of concerns out there about growth," said Rudy Narvas, a senior bond analyst from 4 Cast Limited. | "There are an awful lot of concerns out there about growth," said Rudy Narvas, a senior bond analyst from 4 Cast Limited. |
"This report says the economy is OK." | "This report says the economy is OK." |
But Capital Economics said it did not expect the past quarter's growth rate to be sustained and that annual growth would not be higher than 2%. | |
The US Federal Reserve is anticipating somewhat stronger growth in the second half of 2007 but has still revised downwards its full-year growth forecast to between 2.25% and 2.5% after the slowdown earlier this year. | The US Federal Reserve is anticipating somewhat stronger growth in the second half of 2007 but has still revised downwards its full-year growth forecast to between 2.25% and 2.5% after the slowdown earlier this year. |
The Fed has kept interest rates on hold at 5.25% for several months as it balances concerns over the extent of the housing slump with signs that inflationary pressures may be easing. | The Fed has kept interest rates on hold at 5.25% for several months as it balances concerns over the extent of the housing slump with signs that inflationary pressures may be easing. |