Solid third-quarter US economic growth is expected

AP News
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Posted: Oct 30, 2014 3:14 AM
Solid third-quarter US economic growth is expected

WASHINGTON (AP) — It's taken years, but the U.S. economy may finally be reaching a sustainable cruising speed.

Many economists predict that overall growth, as measured by the gross domestic product, reached a healthy 3 percent annual rate in the July-September quarter, according to a survey by data firm FactSet.

The Commerce Department will release its first estimate of GDP growth in the third quarter at 8:30 a.m. EDT Thursday.

If the expectations prove accurate, it would be the fourth quarter in the past five in which the economy has reached at least a 3 percent growth rate.

For the April-June period, growth reached a sizzling 4.6 percent rate. But that marked a sharp bounce back from the first quarter, when the economy shrank at an annual rate of 2.1 percent — a contraction normally associated with recessions. The stumble reflected largely a harsh winter that closed shopping malls and disrupted much economic activity.

After the roller-coaster first- and second-quarter gyrations, most analysts think the economy is poised to achieve consistently stronger growth for the rest of this year and all of 2015.

Many think full-year growth for 2015 will hit 3 percent, giving the economy the best annual performance since 2005, two years before the Great Recession began.

Much of the optimism stems from the strength of job growth, which has lowered the unemployment rate to a six-year low of 5.9 percent. In September, the economy added 248,000 jobs, extending a string of strong gains.

The additional workers should translate into more income and consumer spending, which accounts for 70 percent of economic activity.

The strength in the United States comes amid weakness overseas. Europe is on the brink of its third recession in seven years, Japan is faltering and China and Brazil are also struggling.

The Federal Reserve noted the brightening U.S. prospects as it ended a policy meeting Wednesday. It retained language in a statement saying it didn't expect to raise its benchmark interest rate for a "considerable time." But it also pointed to rising signs of strength, including job gains and lower unemployment.

Against that backdrop, the Fed ended its third round of bond buying. Over the past six years, the Fed has pumped more than $3 trillion into the economy through bond purchases designed to keep long-term rates low.

Most economists don't expect the Fed to begin raising rates before June. But they viewed the Fed's statement as a warning that if the economy strengthened more than expected in coming months, rate hikes could start occurring sooner than investors think.