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Archive for Wednesday, December 24, 2003

Economic growth fires up

Gross domestic product, incomes, spending increase in third quarter

December 24, 2003

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— The U.S. economy, propelled by tax cuts and low interest rates, roared ahead at an 8.2 percent annual rate in the third quarter, the best showing in nearly 20 years, while Americans' incomes and spending both showed healthy gains in November.

The government reports Tuesday on the gross domestic product, the country's broadest measure of economic health, and personal incomes and spending provided further evidence that the economy was convincingly shaking off a period of lethargy and beginning to fire on all cylinders.

The Commerce Department report that the GDP grew at an 8.2 percent rate in the third quarter, propelled by a surge in consumer spending, was identical to the preliminary estimate made a month ago and represented the strongest growth since an 8.4 percent rate of increase in the fourth quarter of 1983.

In a separate report, the government said consumers were remaining active in the current quarter with consumer spending rising by 0.4 percent in November, the best showing since August, and incomes, helped by rising employment levels, posted an increase of 0.5 percent last month, the best gain since May.

Many analysts believe that GDP growth in the current quarter could top 5 percent, representing the best back-to-back growth rates since the boom years of the 1990s.

The economy began the year growing at much slower rates of 2 percent in the first quarter and 3.1 percent in the second quarter.

All of the GDP figures released Tuesday reflected a comprehensive revision that the government does every five years to make sure the measurement of total output keeps up with the times. With the changes, the GDP grew by 2.2 percent for all of 2002, down slightly from the previous estimate of 2.4 percent.

The benchmark revisions and the changes to third quarter GDP showed a number of crosscutting revisions that basically offset each other to make little impact on the bottom-line number.

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