Exports and state spending help US economy beat expectations
The US economy grew faster than previously estimated in the third quarter as exports and government spending provided a lift, but that boost is likely to be lost amid slowing global demand and a move toward tighter fiscal policy in Washington.
Other figures released yesterday showed factory activity in some parts of the US picked up this month, while November sales of second-hand houses were the best in three years.
However, a rise in first-time applications for unemployment aid last week suggested job growth remained modest.
Gross domestic product expanded at a 3.1pc annual rate, the commerce department said, a step-up from the 2.7pc pace it reported last month.
It was the fastest growth since late 2011 and beat economists' expectations for a 2.8pc pace.
In addition to upward revisions to exports and government spending, consumer spending was also a bit stronger than earlier thought.
"We still expect growth to decelerate in the fourth quarter. Beyond that, all will depend on the resolution of the fiscal cliff negotiations," said Nigel Gault, chief US economist at IHS Global Insight in Massachusetts.
In a second report, the Philadelphia Federal Reserve Bank said its business activity index rose to 8.1 from minus 10.7 in November, boosted by a rebound in new orders and shipments. That is a hopeful sign for the manufacturing sector, which has slowed in recent months.
Separately, the National Association of Realtors said existing home sales surged 5.9pc in November to a seasonally adjusted annual rate of 5.04 million units. It was the highest since November 2009 and confirmed the housing market recovery was strengthening.
"We are seeing ongoing momentum in the housing market," said Robert Dye, chief economist at Comerica in Dallas. Still, the housing market recovery lacks the depth to replace manufacturing as the economy's growth engine.
In a fourth report, the labour department said initial claims for jobless benefits increased 17,000 to a seasonally adjusted 361,000, in the low end of the range they held before Superstorm Sandy in late October.
The data covered the survey period for the government's report on December nonfarm payrolls and suggested modest job gains.
"The pace of hiring is still disappointing," said Tanweer Akram, a senior economist at ING Investment Management in Atlanta, adding that the pace of GDP growth in the current quarter "remains quite soft".
Mr Akram said businesses appeared to be holding back out of concern the fiscal cliff could hit the economy hard.
Even if lawmakers and the White House agree on a plan to avoid the brunt of the blow, a tighter fiscal policy and a cooling global economy will likely still weigh on US growth in coming quarters.
Job gains so far this year have averaged 151,000 per month, a pattern that is likely to hold through December.
Exports grew at a 1.9pc rate, helping to narrow the trade deficit.