Home>News Center>World
         
 

US economy grows at 3.7% annual rate
(Agencies)
Updated: 2004-10-29 21:12

The U.S. economy grew at a 3.7 percent annual rate in the third quarter — a pace that was slightly better than in the spring but not as strong as many analysts expected. Friday's government report was the last such broad snapshot of economic activity before Election Day.

The reading on gross domestic product (GDP) for the July-to-September quarter — the last broad snapshot of economic activity before Election Day — followed a 3.3 percent growth rate in the prior quarter, the Commerce Department reported Friday.

Analysts were predicting that the economy, which Federal Reserve Chairman Alan Greenspan had said hit a "soft patch" in the late spring, would gain traction and expand at a more brisk 4.3 percent rate in the third quarter.

GDP measures the value of all goods and services produced within the United States and is considered the broadest barometer of the economy's health.

"The economy right now is running in the middle lane. We're not in the fast lane but we're not on the shoulder or in the break down lane," said Richard Yamarone, economist with Argus Research Corp.

Although the third quarter's performance fell short of analysts' expectations, it still marked the best growth seen since the first three months of this year.

Consumers — the lifeblood of the economy — snapped out of a funk in the third quarter and boosted spending at the fastest pace in a year. Businesses also increased spending on equipment and software, but they didn't invest as aggressively on building inventories — a factor that restrained economic growth in the third quarter. The bloated trade deficit also weighed on economic activity.

President Bush and his Democratic rival, John Kerry, have divergent views about how the economy and the nation's job market are faring. Bush says his tax cuts helped the economy rebound from the 2001 recession and fostered payroll growth. Kerry contends that the tax cuts mainly helped the wealthy and thrust the government's balance sheets deeper in red ink.

Analysts said the GDP report provides political ammunition for both camps.

In other economic news, employers saw costs for workers' wages and benefits grow by 0.9 percent in the third quarter, the same increase posted in the second quarter, the Labor Department said.

Even though the economy is expanding, the recovery in the job market has been uneven — a situation that has frustrated job seekers. Employers have added more than a million jobs in the past year, but since Bush took office in January 2001, the economy has lost a net 821,000 jobs.

The Federal Reserve, meanwhile, probably will boost short-term interest rates for a fourth time this year when its meet next on Nov. 10. With the economy out of crisis mode, Fed policy-makers want to continue to move rates from extraordinarily low levels to more normal levels to make sure that inflation doesn't become a threat to the economy down the road.

An inflation gauge tied to the GDP report and closely watched by Fed policy-makers showed that prices — excluding food and energy — rose at an annual rate of 0.7 percent in the third quarter, down from 1.7 percent rate of increase in the previous quarter.

From an economic point of view, inflation is still under control even through oil prices have been surging. Oil prices, which recently hit new record territory of just more than $55 a barrel, moderated on Thursday to $50.92 a barrel.

High energy prices pose a risk to the economy — especially if they cause consumers and businesses to become extremely cautious and cut back on spending and investment, analysts say. Economists believe that the impact of soaring energy prices could slow economic activity in the final quarter of this year.

In the third quarter, though, consumers seemed to be in the mood to treat themselves despite high energy prices. They increased spending at a 4.6 percent rate, up from a lackluster 1.6 percent pace in the prior quarter and the biggest increase since the third quarter of 2003.

Spending on big-ticket goods such as automobiles led the way. Consumer spending on such items went up at a whopping 16.8 percent pace in the third quarter, compared with a 0.3 percent rate of decline in the second quarter.

Business investment on equipment and software rose at a 14.9 percent rate in the third quarter, up from a 14.2 percent growth rate in the second quarter.

However, less aggressive spending on inventories by businesses ended up shaving 0.48 percentage point from third quarter GDP. The trade deficit reduced third-quarter GDP by 0.62 percentage point. Those were the two main factors tempering economic growth in the third quarter.

Government spending, meanwhile, increased at a 1.4 percent rate in the third quarter, down from a 2.2 percent growth rate in the prior quarter.



 
  Today's Top News     Top World News
 

Bin Laden says he ordered 9/11 attacks

 

   
 

Priority given to efficient hydropower

 

   
 

Body resembling Japanese hostage found

 

   
 

IOC endorses 'frugal' Games campaign

 

   
 

Sustainable agriculture crucial for progress

 

   
 

Hu urges Pakistan to protect Chinese citizens

 

   
  Bin Laden says he ordered 9/11 attacks
   
  Bush, Kerry spar over Bin Laden video
   
  Body resembling Japanese hostage found
   
  Ailing Arafat examined in French hospital
   
  Fate of missing Iraq weapons unresolved
   
  British troops arrive at base near Baghdad
   
 
  Go to Another Section  
 
 
  Story Tools  
   
  Related Stories  
   
G7 finance ministers confident about economic outlook
   
New efforts needed to cool economy down
   
China, India will sustain global economy
   
Economy grows 9.1% in third quarter
   
Economy grows 9.1% in third quarter
   
Economy grows 9.5% in first nine months
   
Analysis: China's growth blesses the world
  News Talk  
  Are the Republicans exploiting the memory of 9/11?  
Advertisement