US economy grows at fastest rate since 1984
By Alan Beattie in Washington
Published: October 30 2003 14:03 | Last Updated: October 30 2003 21:33
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The US economy exceeded already optimistic expectations in the third quarter, growing at its fastest quarterly rate in nearly 20 years as surging consumption and business investment drove the annualised growth rate to 7.2 per cent.
Economists had expected a surge during the summer, after 3.3 per cent growth in the second quarter, as the effect of tax cuts combined with an unusual weakness in imports to boost domestic growth.
Lex: US GDP
If the strongest US growth rate in 20 or so years is not good enough, the components of US gross domestic product are yet more encouraging.
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The economy is likely to slow considerably in the fourth quarter, as imports catch up and the cashflow effect of the tax cuts is not repeated.
But the first estimate of third-quarter gross domestic product, released on Thursday, showed the quarterly growth rate at its highest since 1984, well above the average Wall Street forecast of about 6 per cent.
The US administration, which has come under fire because of a weak economy and job losses, seized on the data to argue that the tax cuts it pushed this year were working.
Greg Mankiw, the chairman of the White House Council of Economic Advisers, said: "There are lots of reasons to believe that what we saw in this quarter is attributable to the president's jobs and growth package."
But Mr Mankiw and Stephen Friedman, head of the National Economic Council, were more cautious about giving specific forecasts for job growth.
The apparent recent forecast by John Snow, Treasury secretary, of 200,000 new jobs a month next year had been misinterpreted, Mr Friedman said.
Separate data released on Thursday showed that new claims for jobless benefits remained lower than earlier in the year but the closely watched payroll jobs total has yet to show sustained growth. Long-term interest rates and stock prices rose after the data were released.
Inflation as well as growth rose in the third quarter. The price index for personal consumption expenditure excluding food and energy, a measure favoured by the Federal Reserve, rose at an annualised rate of 1.8 per cent, up from 1.1 per cent the previous quarter.
Growth was strong across most sectors, a change to the lopsided pattern of either household or government spending making most of the running.
Economists said one factor that should boost growth in future quarters is the low level of inventories.
As in each of the two previous quarters, companies ran down inventories in the third quarter, subtracting from overall GDP growth.
As companies feel more confident about the recovery they should start to rebuild their stocks of goods on hand.
Personal consumption grew at 6.6 per cent in the third quarter, contributing 4.7 percentage points to the 7.2 per cent growth rate, while fixed non-residential investment rose by a huge 11.1 per cent - further fuelling hopes that capital spending, long a missing link of the anaemic US recovery, was beginning to come on stream.
Exports rose by 9.3 per cent in the third quarter and imports went up by just 0.1 per cent. |
