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Tuesday, December 23, 2014

U.S. Eoncomy Expands At Fastest Rate In A Decade

Economy Grows by Most in a Decade on U.S. Consumer-Spending Gain
Consumer spending is poised to charge into 2015 as more employment and lower gasoline prices boost household confidence and buying power, one reason why the Federal Reserve will probably raise interest rates next year. Photographer: Luke Sharrett/Bloomberg

Economy Grows by Most in a Decade on US 

Consumer-Spending Gain


The world’s largest economy surged in the third quarter, expanding at the fastest pace in more than a decade, as U.S. consumers and businesses spent more than previously estimated.
Gross domestic product grew at a 5 percent annual rate from July through September, the biggest advance since the third quarter of 2003, and up from a previously estimated 3.9 percent, revised figures from the Commerce Department showed today in Washington. The median forecast of 75 economists surveyed by Bloomberg projected a 4.3 percent increase.
Consumer spending is poised to charge into 2015 as more employment and lower gasoline prices boost household confidence and buying power, one reason why the Federal Reserve will probably raise interest rates next year. Other aspects of GDP, including inventories, trade and government spending, are unlikely to maintain the strength seen last quarter, indicating the pace of growth will moderate at the end of the year.
“After five years of weak growth, the economy is finally coming out of rehab,” Ethan Harris, co-head of global economics research at Bank of America Corp. in New York, said in a research note before the report. “Look for the Fed to change policy in a way that only slowly and modestly tightens financial conditions.”
The estimate is the third and final for the quarter and followed a 4.6 percent advance from April through June.
The economy grew at an average pace of 1.3 percent in the first half of the year after expanding at a 2.2 percent rate in all of 2013.

Consumer Spending

Household purchases, which account for almost 70 percent of the economy, rose at a 3.2 percent annual pace, compared with a previously reported 2.2 percent. The revisions reflected stronger spending on health care, recreation and financial services than previously estimated. Outlays on durable and non-durable goods were also revised up.
Personal consumption added 2.2 percentage points to growth. It rose at a 2.5 percent pace in the prior three-month period.
Business investment was also revised up across the board, with bigger gains reported for spending on construction projects, equipment and intellectual property, which includes software and research and development.
Another report today showed similar advances will be difficult to match this quarter. Orders for durable goods, which are those meant to last at least three years, unexpectedly dropped in November, according to Commerce Department data. Demand for computers, metals and electrical equipment declined or was little changed last month as the global economy cooled.

Trade Gap

A smaller trade deficit added 0.8 percentage point to GDP growth last quarter, today’s report showed. That will also probably be difficult to replicate at the turn of the year as a global growth slowdown hobbles exports and gains in consumer spending draws in more imports.
Today’s report showed federal government outlays added 0.7 percentage point to third-quarter growth as federal defense spending jumped by the most since 2009. Total government spending rose at a 4.4 percent pace.

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