Higher govt. spending helps boost U.S. economy growth

PanARMENIAN.Net - The U.S. economy grew at an annual rate of 3.5% in the July-September quarter, the Commerce Department has said, according to BBC News.

That was better than the 3% pace that economists had been expecting and follows the 4.6% growth rate recorded in the April-June quarter.

Strong export growth and higher government spending helped to boost growth in the third quarter.

In a sign of confidence in the U.S. recovery, on Wednesday, Oct 29, the Federal Reserve ended its stimulus scheme.

The fall in the unemployment rate to a six-year low has helped to boost that confidence.

"Today's number represents a return to a healthy-looking trend. The most recent IMF forecasts suggest the U.S. economy will grow 3.1% next year and 3.0% in 2016, and these could be revised further upwards in the coming months," said Ben Brettell, senior economist at Hargreaves Lansdown stockbrokers.

Growth was lifted in the third quarter by a sharp increase in government spending, which itself was boosted by a surge in defense expenditure.

Exports were another area of strength, they rose at an annual rate of 7.8%. But there will be a question over whether that pace can be maintained as important export markets for the U.S. are struggling, the BBC says.

Growth in many European countries is stagnant and the Chinese economy is slowing down.

Consumption growth was relatively weak in the third quarter, running at an annual rate of 1.8%, but economists expect that to improve.

"Conditions are in place for a pick-up in the pace of consumption growth," said Paul Ashworth, chief U.S. economist at Capital Economics.

"Real personal disposable incomes increased by a healthy 2.7% in the third quarter and, with the prospect of further big gains in employment and the impact of the slump in energy prices, real incomes should enjoy an even bigger gain in the fourth quarter."

Overall it has been a volatile year for U.S. growth data.

In the first quarter the economy contracted at an annual rate of 2.1% after severe weather hampered economic activity. But the second quarter saw a rebound, growing at an annual pace of 4.6%. Taken together the latest two quarters are the strongest consecutive quarters of growth since the second half of 2003.