US economy shows some muscle
Washington, December 21, 2012
The US economy grew faster than previously thought in the third quarter, helped by exports and government spending, but a sluggish global demand and belt-tightening by Washington looks set to put on the brakes again.
Other data on Thursday showed factory activity in the mid-Atlantic region picked up this month, while home resales in November were the best in three years, indicating the economy retained some vigor early in the fourth quarter.
However, a rise in first-time applications for unemployment aid last week suggested job growth remains modest.
Gross domestic product expanded at a 3.1 percent annual rate in the third quarter, the Commerce Department said. It was the fastest pace since late 2011 and more than double the second quarter's 1.3 percent rate.
A month ago, the department said GDP grew at 2.7 percent pace during the July-September period.
Millan Mulraine, a senior economist at TD Securities in New York, said the factors that boosted growth in the third quarter probably did not carry through the final three months of 2012.
"I don't think it changes the narrative that this quarter will be very weak. The fact that we had an upward revision means that it's a higher hurdle in the fourth quarter to get above the current best case of 1 percent (growth)," Mulraine said.
Economists say businesses have hunkered down in the current quarter out of worry that currently stalled budget talks in Washington will fail to steer clear of a $600 billion "fiscal cliff" that could tip the economy back into recession.
Even if a deal is reached to avoid the brunt of the blow, a tighter fiscal policy and cooling global economy are still likely to weigh on US growth in coming quarters.
A Reuters poll of economists earlier this month showed a median forecast for GDP growth in the fourth quarter of just a 1.2 percent annual pace. Economists expect GDP to expand just 1.9 percent next year. - Reuters