labels: economy - general
Strong 4Q growth for US economy news
02 February 2007

Washington: The US economy grew at a stronger pace in the final quarter of 2006 without raising inflation pressures, as robust consumer spending more than offset the biggest slump in housing in 15 years.

The Federal Reserve policy-makers' have decided to keep the benchmark overnight federal funds rate steady at 5.25 per cent, while again warning about the risks of inflation. It has also pointed to some signs of a stabilising housing market.

US gross domestic product expanded at a 3.5-per cent annual rate during the October-December quarter, the US commerce department revealed. The rise in GDP was at its quarterly best since the beginning of last year, when the slide in the US housing market was not yet fully evident. It also was at a healthier pace than the annual growth rate of 3 per cent that economists were expecting.

However, Spending on new home building slid at a rate of 19.2 per cent during the quarter, as the housing market continued to weaken and by 4.2 per cent for all of 2006. These were both the largest declines, respectively, since 1991.

The National Association of Purchasing Management, Chicago index was at 48.8 — well below expectations and an indication of economic business contraction the region.

There were, though, some signs of weakness in the report — business investment during the quarter fell 0.4 per cent, breaking a streak of 14 consecutive quarterly increases, though consumer spending advanced at 4.4 per cent rate in the fourth quarter.

Inflation moved ahead at just a 2.1-per cent rate, down from the 2.2 per cent in the previous quarter, but still slightly above the comfort range of the Fed.

GDP growth for the full year grew 3.4 per cent after a 3.2 per cent gain in 2005.


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Strong 4Q growth for US economy