The U.S. economy grew at a healthy 4.9% clip in the third quarter before being buffeted by a worsening housing slump and tighter credit in recent months, the Commerce Department said on Dec. 20. Third quarter growth in the world's biggest economy was the strongest since the third quarter of 2003.
Most economists had anticipated no change to the estimate of growth between July and September.
Although growth accelerated in the third quarter from 3.8% in the second quarter, most economists and even the Federal Reserve expect economic momentum to slow during the end of the year and early next year. Analysts say a worsening housing market, surging home foreclosures, tighter credit and high energy prices are likely to dent U.S. economic growth.
Some economy-watchers are even warning of a potential recession which would mean economic growth turning negative for at least two straight quarters.
Breaking down third quarter growth, the survey showed that residential investment, which covers home building, plummeted a revised 20.5% compared with a prior estimate of 19.7%. Personal consumption expenditures held up well during July through to September, rising a revised 2.8% from a prior tally of 2.7%, bolstered in part by spending on durable goods.
A weakened dollar also helped boost overall GDP. An export boom, fueled in part by the dollar, helped spur third quarter growth. Exports, which add to overall growth, grew a revised 19.1% compared with a prior estimate of 18.9%. Imports, which subtract from growth, rose a revised 4.4% compared with 4.3% previously.
Third-quarter GDP, or the total output of all goods and services produced in the U.S., represents on an annual basis an economy of $13.970 trillion, up six percent before adjusting for inflation.
Copyright Agence France-Presse, 2007