US GDP grows 3.5% in fourth quarter
US GDP grows 3.5% in fourth quarter
By Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: January 31 2007 14:39 | Last updated: January 31 2007 14:39
The US economy expanded at a fast pace last quarter as consumer demand and exports rose while inflation cooled, government figures published on Wednesday showed.
Gross domestic product increased by 3.5 per cent in the last three months of 2006 after a gain of 2 per cent in the previous quarter, while rises in core prices slowed to a rate of 2.1 per cent from 2.2 per cent, the commerce department said.
The stronger-than-expected performance comes as investors and economists are radically upgrading their assumptions about the trajectory of the economy to bring them into line with the confident outlook of the Federal Reserve.
The Fed is expected to keep interest rates on hold when it wraps up its monetary policy meeting later on Wednesday, while warning that it remains wary about the risk of rising inflation in the coming year.
Drew Mathus, an economist at Lehman Brothers, said: “The growth figure shows us that 2006 ended with a bang. It also tells us that the first quarter is not likely to be exceptionally weak. We can also see that inflation remains a modest risk.”
“On balance the Fed is more likely to raise rates than cute rates this year, although we’re currently expecting the Fed to stay on hold for the rest of the year,” the economist added.
The figures sent waves through financial markets as the dollar gained against the euro and yen and bond yields rose to five-year highs.
The yield on the 30-year long-bond rose to more than 5 per cent while the yield on the benchmark 10-year Treasury bond rose to 4.9 per cent.
The positive economic data released on Wednesday is broadly in line with the central bank’s internal assessment of the economy and is unlikely to alter significantly its outlook for interest rates.
Much of the accelerated growth is attributable to a sharp 4.4 per cent rise in personal consumption, as Americans continue to spend despite the correction in the housing market.
The economy was also strengthened by a 10 per cent rise in exports, compared with an increase of 6.8 per cent in the third quarter.
By Eoin Callan in Washington
Copyright The Financial Times Limited 2007
Published: January 31 2007 14:39 | Last updated: January 31 2007 14:39
The US economy expanded at a fast pace last quarter as consumer demand and exports rose while inflation cooled, government figures published on Wednesday showed.
Gross domestic product increased by 3.5 per cent in the last three months of 2006 after a gain of 2 per cent in the previous quarter, while rises in core prices slowed to a rate of 2.1 per cent from 2.2 per cent, the commerce department said.
The stronger-than-expected performance comes as investors and economists are radically upgrading their assumptions about the trajectory of the economy to bring them into line with the confident outlook of the Federal Reserve.
The Fed is expected to keep interest rates on hold when it wraps up its monetary policy meeting later on Wednesday, while warning that it remains wary about the risk of rising inflation in the coming year.
Drew Mathus, an economist at Lehman Brothers, said: “The growth figure shows us that 2006 ended with a bang. It also tells us that the first quarter is not likely to be exceptionally weak. We can also see that inflation remains a modest risk.”
“On balance the Fed is more likely to raise rates than cute rates this year, although we’re currently expecting the Fed to stay on hold for the rest of the year,” the economist added.
The figures sent waves through financial markets as the dollar gained against the euro and yen and bond yields rose to five-year highs.
The yield on the 30-year long-bond rose to more than 5 per cent while the yield on the benchmark 10-year Treasury bond rose to 4.9 per cent.
The positive economic data released on Wednesday is broadly in line with the central bank’s internal assessment of the economy and is unlikely to alter significantly its outlook for interest rates.
Much of the accelerated growth is attributable to a sharp 4.4 per cent rise in personal consumption, as Americans continue to spend despite the correction in the housing market.
The economy was also strengthened by a 10 per cent rise in exports, compared with an increase of 6.8 per cent in the third quarter.
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