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US economy sees surprise growth US economy sees surprise growth
(10 minutes later)
The US economy grew at its fastest rate in one-and-a-half years in the summer, official Commerce Department figures have surprisingly shown.The US economy grew at its fastest rate in one-and-a-half years in the summer, official Commerce Department figures have surprisingly shown.
Despite the downturn in the US housing market, and the global credit squeeze from late August, the US economy grew 3.9% between July and September. Despite the US housing market downturn and the global credit squeeze, the US economy grew at an annualised rate of 3.9% between July and September.
The increase was higher than the 3.8% rate in the previous quarter, with consumer spending up a resilient 3%. This was higher than the annualised 3.8% rate in the previous quarter, with consumer spending up a resilient 3%.
However, analysts say the figures for October to December will be much worse.However, analysts say the figures for October to December will be much worse.
"We suspect that the economy will stall badly over the final three months of the year," Capital Economics said."We suspect that the economy will stall badly over the final three months of the year," Capital Economics said.
"Our starting assumption is that gross domestic production (GDP) will be unchanged, but an outright contraction is a distinct possibility.""Our starting assumption is that gross domestic production (GDP) will be unchanged, but an outright contraction is a distinct possibility."
Dollar boostDollar boost
The 3% rise in third quarter consumer spending was a big increase on 1.4% between April and June. The 3% rise in third-quarter consumer spending was a big increase on 1.4% between April and June.
There was also good news for exporters, with exports of goods and services growing by 16.2%, the biggest year-on-year rise since the final quarter of 2003.There was also good news for exporters, with exports of goods and services growing by 16.2%, the biggest year-on-year rise since the final quarter of 2003.
I don't think there's a soul out there who will say we're anyway close to a 3.9% rate in the fourth quarter Robert MacIntosh, chief economist at Eaton Vance CorpI don't think there's a soul out there who will say we're anyway close to a 3.9% rate in the fourth quarter Robert MacIntosh, chief economist at Eaton Vance Corp
Yet the weakness in the housing market was further underlined by the fact that builders cut investment in housing projects by 20%.Yet the weakness in the housing market was further underlined by the fact that builders cut investment in housing projects by 20%.
The surprisingly strong overall economic growth figures saw the dollar recover slightly from record lows against the euro and the pound.The surprisingly strong overall economic growth figures saw the dollar recover slightly from record lows against the euro and the pound.
However, despite the shock economic growth, most analysts still expect the Federal Reserve to cut interest rates later on Wednesday to give a lift to the housing and credit markets.However, despite the shock economic growth, most analysts still expect the Federal Reserve to cut interest rates later on Wednesday to give a lift to the housing and credit markets.
They point to the fact the US economy had a calm third quarter until the problems in the credit markets first appeared at the end of August.They point to the fact the US economy had a calm third quarter until the problems in the credit markets first appeared at the end of August.
"I don't think there's a soul out there who will say we're anyway close to a 3.9% rate in the fourth quarter," said Robert MacIntosh, chief economist at Eaton Vance Corp in Boston."I don't think there's a soul out there who will say we're anyway close to a 3.9% rate in the fourth quarter," said Robert MacIntosh, chief economist at Eaton Vance Corp in Boston.
"I think that the Fed has more recent data about what's happening here, that's what they'll make their decision on today.""I think that the Fed has more recent data about what's happening here, that's what they'll make their decision on today."