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US GDP today exceeded expectations after growing by 3.9 per cent during the third quarter as the Federal Reserve prepared to announce whether it will cut the interest rate against a weakening dollar.
The rate of GDP outstripped expectations of 3.0 per cent growth, suggesting that the US economy is weathering current global difficulties brought on by the sub-prime mortgage crisis and a lack of liquidity in the financial markets.
GDP was boosted by increases in exports, consumer spending and business investment, making up for a further fall in home construction.
The stronger-than-expected figure has been released just before the US Fed announces whether, as forecast, it will cut the interest by a quarter point to 4.5 per cent after reducing borrowing by half a point in September to 4.75 per cent.
The dollar remained weak against sterling, at $2.07 – the highest point the pound has reached against the greenback since the Thatcher era in 1981.
While third quarter GDP was strong, analysts expect growth will slow in the fourth quarter with some observers expecting an increase of just 1.5 per cent.
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There is no "sub-prime mortgage crisis". I would guess that you guys don't even know what it is supposed to mean. The so-called "subprime mortgage crisis" Is purely an artifact of political correctness. It is a result of banks and other lending institutions being placed under severe pressure to lend money to people who not only are unlikely to be able to keep up with the payments, but who also have no incentive to live up to their obligations, because they expect the state to take care of them. As usual, the banks simply caved, thus we have people defaulting on mortgages which in a sane world would never have been offered in the first place. I see no reason why I should have to pay for this -- maybe Al Gore and the other supergeniuses out there could spare the money to cover it, since they caused the problem from the get-go.
Pink Pig, Sherborn, MA, USA
This is only good news if a Democrat is in office. :o)
Slutty, trampville, Scotland
The Federla Reserve will come to regrert cutting interest by 0.25% today, given the economy grew by 3.9% in 3rd quarter, oil prices and precousm metals are at their highest levels.
James Tidley, New York, USA
The fed has consitently under-estimated gdp growth since Bush took office.
I have no idea if it is the admin sandbagging, putting out lower numbers to make it seem as if things are better when the numbers do come out.
During clinton, the accuracy was usually pretty good.
The gao is supposedly independent, but how do they account for their sudden inability to perfrom a task they have done significantly better in the past, for other presidents?
Same deal with the budget deficits. They have missed towards the high side of every defiict guess.
mark, knoxville, tn