Robust consumer spending and brisk inventory investment boosted US output by a surprisingly strong 3.3 per cent in the third quarter, the government said yesterday in a report suggesting the world's top economy has yet to feel the full brunt of global turmoil.
In its first estimate of overall US growth in the July-September period, the Commerce Department said gross domestic product (GDP) grew at almost twice the 1.8 per cent rate recorded in the second quarter and far above analysts' expectation of a 2.1 per cent gain.
Consumer spending, which accounts for some two-thirds of total GDP, roared ahead at a 3.9 per cent pace after expanding 6.1 per cent in both previous quarters, the report said.
Mr Cheryl Katz, senior economist at Merrill Lynch & Co said the data indicates that "domestic demand is still strong".
While the slowdown abroad hurt US exports, the 2.9 per cent decline was more than offset by a rise in inventory investment as car dealers scrambled to stock up on new models following a crippling strike at General Motors, the US's biggest car prducer in June and July.
Businesses added $57.2 billion worth of inventories, after a more moderate $38.2 billion increase in the previous quarter and contributing about one full percentage point to the rise in overall GDP.
Excluding motor vehicles, third-quarter GDP was up 3.6 per cent. Excluding the rise in inventory investment, the economy grew by a more moderate 2.3 per cent. Imports rose 3.4 per cent, far below the 9.3 per cent gain in the second quarter, the report said.
There was muted reaction among financial markets with bond prices softening and the dollar slightly firmer. Some traders speculated that it might make another interest rate easing by the Federal Reserve less likely when it meets to discuss interest rates on Nov 17.
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