US economy's growth rate hits 20-year high ( 2003-11-26 14:58) (Agencies)
The economy in the third quarter galloped ahead
faster than an initial estimate, which was already the swiftest in nearly two
decades. That burst, along with a surge in consumer confidence, raised hopes for
the recovery's staying power.
The broadest measure of the economy's performance, gross domestic product,
increased at a 8.2 per cent annual rate in the July-to-September quarter, even
better than the 7.2 per cent rate estimated a month ago, U.S. Commerce
Department said Tuesday.
The Gross Domestic Product showed an
amazing growth of 8.2 per cent in the third quarter, according to figures
released by US Department of Commerce.
[AP]
The new GDP reading — embraced by U.S. President Bush as proof of the
effectiveness of his administration's economic policies — represents the
strongest growth since the first quarter of 1984, when the economy surged at a 9
per cent pace. The new estimate is more than double the 3.3 per cent rate in the
second quarter.
"I think the economy is back," declared an optimistic Mark Zandi, chief
economist at Economy.com. "It has evolved from a very fragile recovery to a
sustainable rebound."
In other economic news, consumers' confidence in the economy climbed in
November to the highest level in more than a year as people perceived the job
market to be turning around, the Conference Board reported. The private
research group's consumer confidence index rose to 91.7 in November, up
from a revised 81.7 in October.
"The surge in consumer confidence couldn't come at a better time," said Joel
Naroff, president of Naroff Economic Advisors. "Households are becoming more
confident about the labor markets and the future in general and that bodes well
for this crucial holiday shopping season."
On Wall Street, the Dow Jones industrial average gained 16.15 points to close
at 9,763.94.
Some analysts believe the economy is growing at a slower but still healthy
rate of about 4 per cent in the current October-to-December period, as some of
the stimulus that helped in the third quarter — President Bush's third round of
tax cuts and a wave of mortgage refinancing — fades.
Sales of previously owned homes fell by 4.9 per cent in October to a
seasonally adjusted annual rate of 6.35 million, the National Association of
Realtors said. But even with the decline, October's sales marked the third best
month on record and were on track to set an all-time high for all of 2003.
The main factors behind the upward revision to third-quarter GDP were
stronger investment by business on new equipment and software, less severe cuts
in companies' inventories and more brisk spending on residential projects. GDP
measures the value of all goods and services produced within the United States.
"The economy is regaining the confidence of businesses and they are stepping
up to the plate and spending and investing for the future," said economist Ken
Mayland, president of ClearView Economics.
Bush, who wants the economy on firm footing as he heads into the 2004
re-election campaign, said the GDP report shows "the economy of ours is reacting
to our policy. ... The tax relief we passed is working."
Democrats, however, blame Bush's poor handling of the economy for the loss of
2.3 million jobs since he took office in January 2001.
In October, the unemployment rate improved fractionally, to 6 per cent, as
the economy added jobs for a third straight month.
Steady improvements in job creation and in capital investment are crucial
ingredients for the economic recovery to be sustained, economists said.
Consumers, meanwhile, continue to do their part to keeping the economy going.
They boosted spending in the third quarter at a 6.4 per cent rate. That was up
from a 3.8 pace in the second quarter, but down slightly from the 6.6 percent
rate previously estimated.
Especially encouraging was a 18.4 per cent growth rate in business investment
in new equipment and software in the third quarter. That was even stronger than
the 15.4 per cent pace previously estimated and up from 8.3 per cent in the
second quarter.
Spending on residential projects grew at a whopping 22.7 per cent pace in the
third quarter, also better than the 20.4 per cent first estimated and up from
6.6 per cent in the second quarter.
Fewer cuts to business inventories in the third quarter resulted in a 0.16
percentage-point increase to GDP in that three-month period, compared with a
0.67 percentage-point reduction to GDP as previously estimated.
Another factor in the upward revision to GDP in the third quarter: Slightly
stronger spending by state and local governments. These governmental bodies
boosted spending at a 2.3 per cent pace, up from a 1.3 per cent growth rate
previously estimated.
