FROM THE ECONOMIST INTELLIGENCE UNIT The US economy still contracted by 0.5% in the third quarter, according to final GDP data from the Bureau of Economic Analysis, although consumer spending fell more sharply than previously estimated.
EIU Viewswire via NewsEdge :
FROM THE ECONOMIST INTELLIGENCE UNIT
The US economy still contracted by 0.5% in the third quarter, according to final GDP data from the Bureau of Economic Analysis, although consumer spending fell more sharply than previously estimated. Personal consumption dropped by an annualised 3.8%, compared with a 3.7% contraction under preliminary estimates, while external trade contributed less to headline GDP (as export growth was revised down to 3% from 3.4% under the previous estimate). However investment growth was unrevised at 0.4%, while government expenditure growth was boosted under final GDP data.
THE EIU VIEW
Recent indicators suggest that GDP will contract again in the fourth quarter--retail sales dropped by an average of 6% year on year in October-November, after edging up by 0.6% in the third quarter, while industrial production contracted by an average of 5% year on year in the October-November period after falling by 3% on average in the third quarter. The Economist Intelligence Unit now forecasts that the US will contract by 2% in 2009--after growing by an estimated 1.1% in 2008--as the financial crisis and particularly the deterioration of financial conditions further undermines the housing market and hits consumer spending and business investment. Large-scale monetary stimulus will help to avoid further damage to the financial system, but is unlikely to have a strong impact on the real economy. Even a major further stimulus package, already factored into our forecast, cannot prevent a substantial economic contraction in 2009. This is despite the sharp collapse in crude oil prices, which will boost the purchasing power of US consumers and companies. Consumers are being hit by tightening financial conditions for news loans, a particular concern because much of the earlier spending binge had been debt-financed. Consumer wealth has also been undermined by the collapse of stockmarkets and housing prices and slower borrowing, lower assets and a sharp decline in confidence will lead to a significant increase in the share of income that households save. At the same time, income will be substantially depressed by the deteriorating labour market situation.
USA: GDP(change on an annualised basis, %)1Q 072Q 073Q 074Q 071Q 082Q 083Q 080.14.84.8-0.20.92.8-0.5Source: Bureau of Economic Analysis; Haver AnalyticsSOURCE: ViewsWire
EIU Viewswire -- 12/24/08
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