US Economy Posts Robust Growth In Hurricane-Hit Quarter
Washington (AFP) Oct 28, 2005
The US economy grew at a 3.8 percent rate in the third quarter, according to figures released Friday that surpassed expectations for a period that saw powerful hurricanes batter the US oil industry.
Wall Street was expecting gross domestic product in the world's biggest economy to expand by 3.6 percent in the July-September period, against 3.3 percent in the previous quarter.
The economy appears to have weathered the impact of hurricanes Katrina and Rita, which shut down much of US oil drilling and refining capacity when they swept through the southern United States in late August and September.
US Treasury Secretary John Snow said that coming at a time of such natural disasters, the 3.8 percent growth rate was "truly outstanding".
US GDP has now grown by 3.3 percent or more for 10 straight quarters, Snow noted.
"There can be no doubt that the American economy is an adaptive and resilient marvel, and one that has benefited greatly from good fiscal policies," he said in a statement.
But analysts, noting that the Commerce Department GDP release is only a preliminary figure, said that most of the hurricanes' effects will only come in fuller data for the month of September.
The Commerce Department is set to release a more comprehensive GDP report for the third quarter on November 30.
"The encouraging news is that we still don't have any evidence that higher energy prices are spilling over into other products," Nomura chief economist David Resler said.
"There's a good bit of momentum in the economy, but we're going to have to wait for the monthly consumer spending figures and (GDP) revisions to know more," he said.
The Commerce Department said the major contributors to growth over the July-September period were consumer spending, equipment and software, federal government spending, and the property market.
Those offset the negative impact on growth from companies investing less on their inventories, it said.
Immediately after Katrina flooded New Orleans and battered much of the rest of the US Gulf Coast, fears were expressed that the US economy could lurch into recession as petrol prices soared.
Those concerns would seem to have been overplayed, even if economists were wary of reading too much into the preliminary GDP release.
"Some recession," said Briefing.com analyst Dick Green.
"The rate of change in inventories will probably boost GDP numbers in the quarters ahead rather than subtract from it," he added.
Inflation cooled in the third quarter, despite the impact of high oil prices.
Core consumer prices increased at a 1.3 percent rate in the period, down from 1.7 percent before, the slowest quarterly increase since the second quarter of 2003.
But the core price index, which excludes energy and food prices, is still running at an annual rate of 1.9 percent, near the top of what is believed to be the Federal Reserve's comfort zone.
The US central bank meets on Tuesday and is expected to raise interest rates afresh to 4.0 percent in a continuing campaign to keep a lid on inflationary pressures.
"The Fed still has a green light to go ahead and raise rates for at least the next two meetings based on above-trend economic growth," Wachovia chief economist John Silvia said.
He predicted the third-quarter GDP figure would be revised down to about 3.5 percent once the full impact of the hurricanes is evaluated.
"But consumption, business, government and residential spending are all contributing to growth, and that won't change with any revisions. So that's very positive," Silvia said.
"You end up with an economy that has good forward momentum."
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Florida Governor Bush Admits Wilma Relief Effort Weak
Miami (SPX) Oct 26, 2005
Victims of Hurricane Wilma's wrath in Florida pressured officials for relief Wednesday as they suffered a third day without electricity and scant basic supplies, while Governor Jeb Bush admitted the emergency relief effort "didn't work as it should."