There is no doubt that the strong economic growth in the United States is good news for many, particularly for President George W. Bush as the election year is drawing near.

The US Commerce Department reported on Thursday that the economy grew at a brisk 7.2 per cent annual rate in the third quarter, the strongest quarterly increase since 1984.

Although some analysts had predicted in recent weeks that the US economy might increase at a rate higher than 7 per cent in the third quarter following a 3.3 per cent gain in the previous quarter, the brilliant figure still comes as a surprise.

The National Association for Business Economists (NABE) predicted the growth rate will reach 4.3 per cent in 2004, the best annual growth since the US economy rose 4.1 per cent in 1999.

Some analysts said it was fantastic news for the US Government, particularly for President Bush as 2004 will be a big year for him, when the national election will decide whether he can hold on to power in the White House.

The major engine behind the strong increase was the surge in US consumer spending, which accounts for about two-thirds of the US gross domestic product (GDP). The consumer spending increased by a strong 6.6 per cent annual rate in the third quarter, compared with a 3.8 per cent rise in the second quarter and 1.4 per cent in the first quarter.

Another encouraging sign was the 15.4 per cent growth rate in business spending on equipment and software in the third quarter, the largest increase since the first quarter of 2000 and a big step forward from the 8.3 per cent gain in the second quarter.

The decline in the trade deficit also contributed to the strong growth in the July-September quarter.

Exports increased by 9.3 per cent after declines in three consecutive quarters, while imports grew by only a slim 0.1 per cent following a strong 8.8 per cent gain in the second quarter.

However, some analysts warned that Americans should not be overly optimistic about the brisk economic growth in the third quarter as many economists predicted that the growth would slow down and settle at around 4 per cent in the current quarter.

The NABE said in a recent forecast that the US GDP growth would be 4 per cent in the final quarter and 2.6 per cent for the whole year.

Apart from the problems that have surfaced recently, some ailments plaguing the country for a long time could hardly evaporate soon.

The overcapacity built up in an over-heated economy amid stock market bubbles made recovery from the recession which ended in November 2001 quite slow during the past two years.

There is no quick fix for the problem of overcapacity. The US business fixed expenditure had declined for eight quarters in a row between the fourth quarter of 2000 and third quarter of 2002. US factories also saw a net loss of jobs for 38 months in a row. Such problems will drag on in the coming quarters.

The US economy also suffers from two huge deficits: the federal deficit and trade deficit. The federal deficit, which is expected to reach US$500 billion, or about 5 per cent of the total GDP in the current fiscal year, is particularly worrisome to many economists and the Bush administration.

The US Federal Reserve (Fed) decided this week to keep the short-term interest rate unchanged at the lowest level since 1958.

Moreover, many economists predicted that the unemployment rate in the United States would not fall much in the next year and the jobless rate will be around 6 per cent or a little less around November, when the presidential election will be held.

"I'm not sure how the US economy will end up this year and predictions now vary widely,'' Charlene Barshefsky, the trade representative in the Clinton administration, said earlier this week.

Close

Today's Top News		Top National News
+Wen, Berlusconi vow to expand ties ( 2003-11-01) +Taikonaut sparks space enthusiasm in HK ( 2003-11-01) +Forum set to promote regional integration ( 2003-11-01) +Market-based maritime legal system supported ( 2003-11-01) +Commitment to further nuclear talks hailed ( 2003-11-01)		+Commitment to further nuclear talks hailed ( 2003-11-01) +Commentary: Growth of US economy misleading ( 2003-11-01) +Taikonaut sparks space enthusiasm in HK ( 2003-11-01) +Market-based maritime legal system supported ( 2003-11-01) +Forum set to promote regional integration ( 2003-11-01)