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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 US housing market downturn and the global credit squeeze, the US economy grew at an annualised rate of 3.9% between July and September. | |
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 boost | Dollar boost |
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 Corp | 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 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." |
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