Consumer spending lifts US growth

US economic growth accelerated in the third quarter, helped by strong consumer spending, official figures have shown.

The economy expanded at an annual rate of 3.7% in the July to September period, the Commerce Department said. The figure marked an increase on the 3.3% growth recorded in the second quarter, but fell short of the 4.2% rate pencilled in by forecasters. The increase reflected the biggest jump in consumer spending in a year. "It was a little softer than the consensus, but not a real surprise," said Gary Thayer, an economist at AG Edwards & Sons. Friday's growth estimate is one of the last significant pieces of economic data before the 2 November presidential election.

Democrat challenger John Kerry has criticised President George W Bush's handling of the economy, pointing to a net loss of over 800,000 jobs since Mr Bush took office. Analysts said the economy was still not growing fast enough to stimulate large-scale job creation. "It's a pretty good growth rate, but it may not be good enough to create enough jobs," said Robert Brusca, chief economist at Fact and Opinion Economics in New York. However, President Bush is expected to point to Commerce Department figures showing that consumer spending grew at 4.6% in the third quarter, up from just 1.6% in the second, as evidence that his policies are generating solid growth. Consumer spending accounts for about two thirds of all economic activity in the US.

The weaker than expected growth figure makes it less likely that the US Federal Reserve will raise interest rates next month, economists said. "The economy regained some traction in the third quarter, but the growth is not robust," AG Edwards' Thayer. "I think that means the Fed can take its time raising rates. We'll probably see one more rate hike before the end of the year." In an effort to pre-empt rising inflation, the Federal Reserve has pushed through three quarter-point rate rises since June this year, taking borrowing costs to 1.75%. On the financial markets, the dollar fell slightly against the euro and the yen, while the Dow Jones index of leading US shares was little changed.
