US allays recession fears with stronger growth
The US economy recorded its fastest growth in a year last quarter as American consumers and businesses defied the turmoil in financial markets and picked up their spending.
And US markets opened higher today as they digested the Greek bailout deal done in Europe over night.
New figures show that Gross Domestic Product growth is a just enough to keep the unemployment rate from rising - bad news for the 14 million people out of work and for President Barack Obama, who will be facing voters next year.
GDP in the third quarter expanded at an annualised pace of 2.5pc, up from 1.3pc in the second quarter of the year, the Commerce Department said today.
Households and businesses drove the growth in a quarter marked by the debacle in Washington over the debt ceiling and a heightening of fear in the US over the threat posed to the global economy by Europe's debt crisis.
However, an easing in gasoline prices saw household spending climb at a 2.4pc pace in the quarter, more than double forecasts.
American businesses, which are sitting on more than $1 trillion in cash, also dug into their corporate pockets to spend on a range of equipment including computer technology and software. Business spending jumped at at 16.3pc rate in the quarter.
The third-quarter figure matched the expectations of economists on Wall Street.
"The components are better than expected," said David Semmens, a US economist at Standard Chartered. "We would look for more momentum from business investment and consumer spending before getting carried away."
There was some encouragement, though, to be taken from the small contribution an expansion of inventories by companies played in the quarter's growth. Inventories climbed $5.4bn, down from $39.1bn in the second quarter, a shrinking that will have proved a headwind during the quarter.