Sunday 19 January 2020

Warning that US growth may fade

The US economy expanded more vigorously than previously thought in the fourth quarter of 2009, showing its biggest rise in six years. But economists warned that the boost to growth may fade as the year progresses and the effects of the government stimulus wear off.

Separate figures showing a surprise plunge in house sales also raised concern about the sustainability of America's return to economic growth.

According to the commerce department, the US economy expanded at 5.9pc in the fourth quarter of 2009, an improvement from an earlier estimate of 5.7pc.

The upward revision was driven by positive contributions from business investment and inventories, but consumer spending was less than thought.

The fourth-quarter figure compares with 2.2pc growth in GDP in the third quarter of 2009, lifting the world's biggest economy from recession after four quarters of contraction. For the full year of 2009, GDP fell by 2.4pc, marking the biggest full-year decline since 10.9pc recorded in 1946.

The better-than-expected US GDP figures follow data from the UK's Office for National Statistics showing that Britain emerged from recession more strongly than previously thought in the fourth quarter, with 0.3pc growth, compared with an earlier estimate of 0.1pc.

The US data was keenly awaited after worse-than-expected unemployment data on Thursday, showing new jobless claims of 22,000 last week to a seasonally adjusted 496,000. The figures also coincided yesterday with new data suggesting that the housing market's recovery is faltering.

The US National Association of Realtors said sales of previously occupied homes fell by more than expected at a rate of 7.2pc in January.

Markets gave a mixed reaction to the data. After falling 45 points in early trading, the Dow Jones Industrial Average was flat at 10,322 by lunchtime. The S&P 500 was also flat at 1,102.87.

Irish Independent

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