economy is still growing. Still no signs of inflation. Jeff
Economy Grows at 3.7 Percent Pace
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WASHINGTON (AP) -- The American economy is expanding at a robust rate despite trade problems linked to the world economic slump.
The gross domestic product -- the sum of all goods and services produced within U.S. borders -- grew at a 3.7 percent annual rate during the July-September quarter, the Commerce Department said today.
That wasn't quite as fast as the 3.9 percent estimated by the department last month, but it was nevertheless quite brisk, especially considering that much of Asia, Russia and other developing-country economies are in recession.
The world slump has hurt American factories and farms but so far hasn't much harmed other sectors. And even manufacturing looked good in November. In a separate report, the department said orders to factories for big-ticket durable goods, items intended to last three or more years, jumped 1 percent to a seasonally adjusted $190.7 billion, the fifth increase in six months.
A 9.9 percent surge in demand for primary metals such as steel, the most in four years, led the advance. Orders also increased for industrial machinery and transportation equipment.
Faced with convincing evidence of the economy's resilience, Federal Reserve policy-makers decided in their last meeting of the year on Tuesday to hold short-term interest rates unchanged.
They had sought to insulate the American economy from global weakness and calm financial markets with three quarter-point interest-rate cuts this fall in the benchmark rate on overnight loans between banks, bringing it to 4.75 percent.
Economists said the central bank will refrain from further cuts, possibly well into next year.
''I don't think there's going to be any further easings,'' said economist Joel Prakken of Macroeconomic Advisers in St. Louis. ''Unless the economy really slows down very quickly and very sharply, I think they're going to sit and see what happens.''
He said he expected growth would prove to be robust again in the current quarter and then slow next year to a moderate rate around 2.5 percent.
If the expansion, which began in March 1991, lasts past next year, it would become the longest in U.S. history, surpassing even the 1961-69 expansion, which was sustained in its last years by production for the Vietnam War.
During the third quarter, consumer spending advanced at a rapid 4.1 percent annual rate and housing construction soared at a 9.9 percent annual rate.
That helped offset the deteriorating trade deficit and a drop in business investment in new equipment, at a 1 percent annual rate, the first decline since 1991.
Commerce Department economists said a slightly worse trade performance than previously estimated was largely responsible for the modest downward revision in overall GDP growth.
For the first time in 40 years, U.S. export sales fell for a third consecutive quarter. They were down at a 2.8 percent annual rate over the July-September period, while imports from abroad rose at a 2.3 percent rate.
Meanwhile, an inflation measure tied to the GDP increased at a 1 percent annual rate, nearly the lowest in 35 years.
American corporations are being squeezed by the loss of sales abroad and their inability to raise prices at home. After-tax profits fell 1 percent in the third quarter, the third decline in the past four quarters. That's somewhat better than the 1.8 percent drop estimated a month ago. Still, they're down 5.4 percent from a year ago.
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