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 user 2003-11-07 at 10:39:00 am Views: 54
  • #8367

    Business Finally Comes Through in GDP Number 

    While the sizzling pace of third-quarter growth isn’t likely to be repeated in the fourth quarter, economists say a broad-based recovery is finally starting to take shape.

    U.S. Gross domestic product rose at a 7.2% annual rate in the third quarter, the fastest pace since the first quarter of 1984 and more than double the 3.3% rate in the second quarter.

    “Certainly the fourth quarter is not going to be as strong as the third quarter,” said Paul Kasriel, chief economist at Northern Trust. “But the important thing is the baton is being passed [from the consumer] to the export and capital goods producing sector, and so we’re going to have more balanced growth going forward.”

    Consumer spending, which accounts for two-thirds of GDP, rose at a 6.6% rate in the third quarter, the fastest pace since the first quarter of 1988. Economists note that much of the strength came from mortgage refinancing and tax cuts, which won’t be as effective in the current quarter. Kasriel is expecting fourth-quarter GDP growth of 3.8%.

    The good news is that U.S. consumers, who carried the economy almost single-handedly over past two years, are finally getting some help from the business world. Corporate spending surged 11.1% in the third quarter, up from the 7.3% rate recorded in the second quarter and the fastest pace since early 2000.

    “What’s especially encouraging is the acceleration in the growth of equipment and software expenditures,” said Kasriel. “I do think we have turned the corner on capital spending, and that’s due to stronger profit growth.”

    Spending on computers and equipment surged 15.4% in the quarter, up from the 8.3% rise in the second quarter. Economists say they were also impressed with a 9.3% rise in exports. Although this number is merely an estimate — all the data aren’t in yet — the increase shows that a global economic recovery is beginning to take hold.

    face=Arial color=#0000ff Continued . . .