WASHINGTON, Nov 30 (AFP) - The US economy expanded at a faster-than-expected 3.9-percent pace in the third quarter as consumer and business spending surged, the government said Tuesday.
But concern deepened over 2005, with crucial consumer confidence apparently flagging.
Gross domestic product (GDP) grew at an annual 3.9-percent pace in the July-September period, up from an initial estimate of 3.7 percent growth, the Commerce Department said.
The economy grew 3.3 percent in the second quarter.
The report "revealed that the third quarter was stronger than first reported, but this rear-view take on the economy does not change our view that growth will decelerate significantly in 2005," said Merrill Lynch chief North American economist David Rosenberg.
He forecast a growth rate of just 2.5 percent in the first quarter of next year, in part because of a slowdown in orders in the technology sector.
Highlights of the third-quarter report showed:
-- Consumer spending leapt 5.1 percent in the third quarter after a modest 1.6-percent increase in the second quarter.
-- Business investment roared 12.9 percent higher, after an increase of 12.5 percent the previous three months. Equipment and software spending alone boomed 17.2 percent.
-- Exports soared 6.3 percent, after a 7.3-percent leap the previous quarter.
-- Final sales surged 4.9 percent, after growth of 2.5 percent the previous quarter.
US President George W. Bush's administration gloated over the figures.
"Today's report illustrates the strength of the US economy, and shows how its underlying fundamentals are ensuring sustainable, non-inflationary growth," Treasury Secretary John Snow said in a statement.
BMO Financial Group senior economist Sal Guatieri said the upward revisions to the economic figures were small but encouraging.
"It suggests solid momentum heading into the fourth quarter, especially now that we are seeing an upturn in job growth," Guatieri said. He forecast economic growth of about 4.0 percent in the fourth quarter.
News of a broad, solid expansion also was likely to cement Federal Reserve plans to raise key short-term interest rates for the fifth time in a row when policymakers meet December 14, he said.
The US labor market appeared to emerge from a quagmire in October, churning out a seven-month record of 337,000 jobs -- far more than predicted by Wall Street.
Many analysts estimate new employment figures, due Friday, will show another 200,000 new jobs being created in November.
Inflation appeared tame in the third quarter. Prices paid by consumers for core goods -- excluding food and energy -- were up just 0.7 percent, the lowest rate in 42 years.
But in a worrying sign for the outlook, a Conference Board index of consumer confidence weakened for the fourth straight month in November, declining 2.4 points from October to 90.5.
It was the weakest reading since March.
A breakdown of the Conference Board survey showed an index of confidence in current conditions rose 1.2 points to 95.2 but an index of expectations slumped 4.8 points to 87.4.
"With consumers' assessment of current conditions holding steadfast and intentions to spend for the holiday season up from a year ago, the outlook for retailers is mildly encouraging," Conference Board consumer research chief Lynn Franco said.
"But looking beyond the upcoming holidays, the continuing erosion in expectations suggests consumers do not feel the economy is likely to gain major momentum in early 2005."
Consumer spending accounts for two-thirds of US economic activity.
Another industry survey showed business activity in the US Midwest slowed modestly in November as input prices soared to the highest level in nearly a quarter century.
The survey-based barometer of business activity in the Chicago area fell 3.3 points to a seasonally adjusted 65.2 points in November, the National Association of Purchasing Management - Chicago, said.
11/30/2004 17:06 GMT - AFP