Economy hale despite blast of hurricanes

first_img AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREBlues bury Kings early with four first-period goals “The economy shrugged off the ill effects of the hurricanes very gracefully,” said Mark Zandi, chief economist at Moody’s Economy.com. The hurricanes did bite into economic activity, especially when it came to jobs. Zandi and other economists believe economic growth probably would have topped 5 percent if the hurricanes had bypassed the United States. Nonetheless, the GDP’s growth during the third quarter was the strongest since the first three months of 2004. Also, it showed the economy gained considerable momentum from the 3.3 percent pace in this year’s second quarter, the April-June period. On Wall Street, the Dow Jones industrials lost 82.29 points as investors fretted that the robust GDP growth might prompt the Fed to order more rate increases in the future than had been anticipated. Separately, a Federal Reserve report suggested the economy had solid momentum in October and much of November. WASHINGTON – The nation’s economy demonstrated just how sturdy it is, posting its strongest quarterly showing in more than a year despite the Gulf Coast hurricanes. Gross domestic product, the best measure of economic standing, increased at a hardy 4.3 percent annual rate from July through September, the Commerce Department reported Wednesday. The reading was even better than the 3.8 percent pace estimated a month ago for the third quarter, and it exceeded analysts’ projections of a 4 percent pace. GDP measures the value of all goods and services produced within the U.S. The upgraded performance reflected brisk spending by consumers and businesses, despite record energy prices, and stronger investment in home building. Manufacturing, retail sales and hiring improved in many regions, the Fed said. Housing activity, while still healthy, slowed in many markets; demand for home mortgages eased in some areas. The Fed’s observations added to other signs of a gradual cooling in the hot housing market. Looking ahead, economists predict the economy will turn in a solid performance in the October-to-December quarter, even based on the assumption of consumers’ belt-tightening. Economic growth projections for the fourth quarter range from a growth rate of more than 3 percent to 4 percent. A few analysts believe the GDP could come in around 2 percent, a subpar performance. In the third quarter, though, consumers and businesses did their part to keep the economy rolling. Consumer spending grew at a 4.2 percent pace, the strongest since the final quarter of 2004. Economists predict consumer spending will slow considerably in the fourth quarter even if holiday sales are solid. Growth from other areas should help blunt that and allow the economy to log a good quarter, most economists said. Businesses boosted spending on equipment and software at a 10.8 percent annual rate in the third quarter, while investment in housing construction grew at an 8.4 percent pace. Federal spending rose at an 8.1 percent rate, reflecting some outlays due to the hurricanes, analysts said. President George W. Bush, pointing to the GDP report, said Wednesday that “businesses have overcome the challenges of two hurricanes and high energy prices.” That good news, however, has not helped Bush’s approval ratings in polls. They have fallen to some of the lowest levels of his presidency. While the overall economy has weathered the fallout from the hurricanes well, the labor market has felt more deeply the devastation. Employment in September declined for the first time in two years. In October, payrolls grew by just 56,000, an anemic figure. Ahead of the government’s release Friday of the employment report for November, many economists are forecasting a healthy rebound, with the economy adding more than 200,000 jobs during the month. Fed Chairman Alan Greenspan and his colleagues maintained at their Nov. 1 meeting that the hurricanes only “temporarily depressed” employment and production. Katrina slammed into the Gulf Coast in late August; Rita followed in late September. Those storms, which battered crucial oil and gas facilities, choked off commerce and destroyed businesses, sent energy prices skyward and fanned inflation fears. To fend off inflation, the Fed raised interest rates in November and signaled that a rate increase was likely at its next meeting, Dec. 13. The Fed’s regional survey, released Wednesday, found consumer prices increased moderately in some areas as certain businesses passed along to shoppers a portion of their higher energy costs. “Persistent … price pressures” for energy and other materials used by businesses were reported in most regions. An inflation gauge tied to the GDP report showed prices rising at a 3.6 percent rate in the third quarter, compared with a 3.3 percent pace in the prior period. When food and energy prices are excluded, “core” inflation – which the Fed watches closely – actually moderated. Core inflation rose at a rate of 1.2 percent in the third quarter, down from a 1.7 percent pace in the second quarter. 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img read more