BBC NEWS | 2009/12/22 | 22:00:40 GMT
The US economy grew by less than originally estimated between July and September, official figures show. The latest estimate said the economy grew at an annual pace of 2.2%, down from the previous estimate of 2.8%. The first reading had shown growth of 3.5%. It is the first quarter in which the US economy returned to growth, after four quarters of decline. Separately, a report showed new home sales rose 7.4% in November, spurred on by government incentives. The National Association of Realtors said sales rose to an annual rate of 6.5 million – the highest level in more than two years.
“This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead,” said the National Association of Realtors’ chief economist Lawrence Yun. The original deadline for the US government’s tax credits was 30 November. It was later extended. Mr. Yun said: “We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010.” The report pushed stocks on Wall Street higher as the markets closed on Tuesday. The Dow Jones industrial average rose 50 points, and both the Standard & Poor’s 500 and the NASDAQ indexes closed at new highs for the year.
There is concern that the country’s high unemployment rate, currently at 10%, could hamper the recovery. If consumers are concerned about where their next pay cheque is coming from, they hold back on spending. “The recovery is underway, but this does raise concerns about its strength and the prospects for a turnaround in the labour market,” said Augustine Faucher at Moody’s Economy.com. US GDP is expressed as an annualised rate, or annual pace, which shows what the annual rate would be if the latest change continued for the rest of the year.
The main factors behind the lower growth were that consumers did not spend as much as first thought, commercial construction was weaker and companies cut back on inventories. Consumer spending was revised to show 2.8% growth compared with the previous estimate of 2.9%. Looking forward, Scott Brown, chief economist at Raymond James & Associates expects growth to jump to at least 4% in the fourth quarter because of companies restocking their much-depleted inventories. They have been so dramatically slashed during the recession that even a small pickup in customer demand will force factories to step up production and boost overall economic activity, he said.