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US economy is growing once again
29 October 2009 08:34 am
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The US economy grew at an annualised rate of 3.5% between July and September, its first expansion in more than a year, official data has shown.

Analysts say the growth was helped by the cash for clunkers car scrappage scheme, and the fear is growth will now fall after this ended in August.

The US economy was also lifted by President Obama's $787bn (£480bn) economic stimulus plan.

But with unemployment still high, the ongoing recovery is set to be slow.

Global good news

The economic growth between July and September indicates that the US has likely exited a recession that first started in December 2007.

However, the official confirmation still has to come from the National Bureau of Economic Research, the agency which considers a number of factors in coming to its decision.

The US economy last expanded in the second quarter of 2008, when it grew 2.4%.

BBC chief economics correspondent Hugh Pym said the 3.5% growth was more than the 3.3% expected by most commentators.

"The sheer scale of the stimulus in the US has made a big difference, it was much bigger in percentage terms than that in the UK," he said.

"That the US, the powerhouse of the world economy is growing once again, is good news for the global economy has a whole."

Numerous boosts

The figures from the Commerce Department showed that a number of factors helped to lift the economy during the third quarter.

I've been out of work a few months here or there but never like this

Spending on durable manufactured products soared at an annualised rate of 22.3%, the highest quarterly amount since 2001, led primarily by the impact of the cash for clunkers scheme lifting car sales.

The housing market also improved, with spending on housing products up 23.4%, its largest quarterly jump in 23 years.

Analysts said this big leap was sparked by the government's $8,000 tax credit for first-time house buyers.

Meanwhile, total government spending was up 7.9%, as the wider stimulus spending continued to take effect.

In addition, exports were also up strongly, increasing 21.4%, the biggest rise since 1996.

'Distorted by stimulus'

"It's good to have the economy growing again," said Brian Bethune, economist at IHS Global Insight.

"But we don't think that rate of growth is sustainable because it is distorted by all the government stimulus.

"The challenge here is to get organic growth - growth that isn't helped by fiscal steroids."

Analysts cautious about the slow nature of the US economic recovery point to the fact that the unemployment rate currently stands at 9.8%, and that the labour market traditionally lags behind any wider economic recovery.

They also highlight the fact that the big car firms have already reported a sharp fall in September sales following the conclusion of the popular $3bn cash for clunkers scheme at the end of August.

"You can say that the recession is over, but it sure won't feel like that," said Dean Baker, co-director of the Centre for Economic Policy Research.

"There is a lot of downward momentum that isn't going to go."


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