*NEWS*U.S.:3RD-QTR GREW AT 8.2% RATE
*NEWS*U.S.:3RD-QTR GREW AT 8.2% RATE
2003-11-26 at 9:35:00 am #7999
WASHINGTON – Robust business and consumer spending powered the U.S. economy ahead in the third quarter at an even brisker clip than first thought, the government said on Tuesday in a report also showing the biggest jump in corporate profits in more than a decade.
Gross Domestic product, or GDP , shot up at an 8.2 percent annual rate, more than double the second quarter’s 3.3 percent gain and the strongest quarterly advance in 19-1/2 years.
A month ago, the Commerce Department ( face=Arial color=#0000ff face=Arial news – face=Arial color=#0000ff face=Arial web sites) estimated that GDP had grown at a 7.2 percent rate in the third quarter.
Reinforcing an impression that a stronger-paced recovery was gaining traction, a separate private-sector report found consumer confidence hit a year-high peak in November, buoyed by hopes of improved hiring prospects.
The New York-based Conference Board ( face=Arial color=#0000ff face=Arial news – face=Arial color=#0000ff face=Arial web sites) said its index of consumer confidence climbed to 91.7, its highest level since September 2002, from a revised 81.7 in October. Wall Street analysts had forecast a rise to 85.0.
RUSH FOR CREDIT
A reinvigorated economy could be a significant factor in next year’s U.S. presidential elections — now less than a year away — as Bush administration officials seek credit for the revival by saying it stems primarily from its tax cuts.
“The economy of ours is reacting to our (tax cut) policy,” President Bush ( face=Arial color=#0000ff face=Arial news – face=Arial color=#0000ff face=Arial web sites) told a fund-raising event in Las Vegas. “Business investment is rising. Housing construction is strong. The job base is expanding. The tax relief we passed is working.”
The blistering pace of expansion is forecast to slow to around a 4 percent rate for the rest of this year and in 2004, and stock markets took the third-quarter rebound calmly.
The Dow Jones Industrial average added a slight 16.15 points to close on Tuesday at 9,763.94, while the high tech-laden Nasdaq composite index edged down 4.10 to 1,943.04. It followed gains earlier in the week, though, showing solid investor sentiment.
The National Association of Purchasing Management-New York said business conditions in the city improved slightly in November, with its index of economic activity edging higher to 227.3 in November from 226.4 in October.
One sour note came from the housing sector — one of the economy’s mainstays in the crawl back from recession in 2001 — where sales of existing homes dropped sharply by 4.9 percent to 6.35 million in October.
Sales for the full year 2003 are on track to set a record, analysts say, but a recovering economy eventually will mean higher interest rates that can be a damper on home sales.
BUSINESS LOOKING UP
The GDP report pointed to a long-awaited revival in corporate investment, with nonresidential business spending surging at a 14 percent annual rate, double the second quarter’s 7.3 percent and ahead of the initially reported third-quarter rise of 11.1 percent.
“This is a red hot economy,” said economist Patrick Fearon of A.G. Edwards and Sons Inc. in St. Louis, Missouri. “It looks like a lot of the revision came in investments, which is a positive sign because that had been an area of real weakness for a while.”
The department revised its estimate of inventory cuts, saying stocks of unsold goods fell by $14.1 billion in the quarter instead of the $35.8 billion it originally reported.
Consumer spending, bolstered by tax cuts, grew at a revised 6.4 percent annual pace in the third quarter, below the 6.6 percent pace estimated a month ago but well ahead of the second quarter’s 3.8 percent.
Corporate profits after tax climbed at a 10.6 percent annual rate during the quarter, a sharp change from the second quarter’s 5 percent contraction. Commerce said it was the strongest pickup in profits since a 12.4 percent jump in the fourth quarter of 1992.