GDP growth surges in Q3

The Business Times (30 November 2007)

(WASHINGTON) A surge in inventory-building and robust exports propelled US economic growth ahead at the fastest rate in four years during the third quarter, but a jump in claims for jobless benefits last week underscored the sharp slowdown now under way.

The Commerce Department reported yesterday that gross domestic product (GDP) that measures total production within US borders climbed at a revised 4.9 per cent annual rate instead of 3.9 per cent reported a month ago.

It was the strongest quarterly growth rate since Q3 of 2003 when GDP surged at a 7.5 per cent rate and slightly exceeded Wall Street economists' forecast for a 4.8 per cent rate of increase.

The department revises its GDP figure twice after its initial estimate and will publish its final figure for Q3 performance on Dec 20.

Q3 GDP is now regarded as old information by Wall Street participants, who focused on the surge in jobless aid claims.

A slumping housing sector and waning consumer confidence already is predicted to sap Q4 growth and analysts say that risks are rising for a recession next year.

The Labor Department said new claims for unemployment aid jumped by 23,000 last week to the highest since February, though that figure might have been affected by the fact that last Thursday was the US Thanksgiving Day holiday.

'It looks like it could be lights out for the economy,' said economist Chris Rupkey of Bank of Tokyo-Mitsubishi UFJ in New York, referring to the rise in claims. 'This is exactly what it looks like when we are going into recession.'

Meanwhile, sales of new single-family US homes rose 1.7 per cent in October while the median sales price dropped sharply and the inventory of homes fell slightly, according to a government report yesterday that delivered uneven news for the ailing housing sector.

New single-family home sales rose to an annual rate of 728,000 from a downwardly revised rate of 716,000 in September, the Commerce Department said.

October's rise was the first since April, but it came after a revised September sales pace figure that was the lowest since January 1996.

There were 516,000 new homes for sale at the end of the month, a 2.3 per cent drop from September.

It would take 8.5 months to clear that inventory at the current sales pace, down from the nine months' supply reported in September. -- Reuters