www.bloomberg.com/apps/news?pid=20601087&sid=ajeZ0OYVe4.o
Bloomberg Press US Economy Expanded at 49% Rate in Third Quarter (Update2) By Courtney Schlisserman Nov. The world's largest economy grew at an annual rate of 49 percent, the most in four years, according to revised data today from the Commerce Department in Washington. The pace is a percentage point stronger than estimated last month and follows a 38 percent rate in the second quarter. Consumers and businesses are spending less as home prices fall, energy costs rise and banks make getting loans more difficult and costly. Federal Reserve Vice Chairman Donald Kohn yesterday signaled he's open to lowering interest rates again following the deterioration in credit markets. The odds of recession are much too close for comfort,'' said Douglas Porter, deputy chief economist at BMO Capital Markets in Toronto, who correctly forecast the GDP revision. Initial jobless claims increased by 23,000 to 352,000 in the week that ended Nov. The number of people staying on benefit rolls was the highest in almost two years. Treasuries Rise US Treasury securities held earlier gains after the reports. The benchmark 10-year note yielded 397 percent as of 8:54 am in New York, down 7 basis points from yesterday. Gross domestic product matched the median estimate of 75 economists surveyed by Bloomberg News. The Commerce Department's report on new home sales, due at 10:00 am, is projected to show purchases declined in October. Investors and traders also await comments from Fed Chairman Ben S Bernanke, who's scheduled to speak this evening. Today's report is the second of three estimates released by the government for the quarter. Profits Decline The figures included a first look at corporate profits for the quarter. Compared with a year earlier, profits were up 19 percent. Income revisions for the second quarter also showed wages rose less than previously estimated. Personal income increased at a 38 percent annual pace from April through June compared with an initial projection of 53 percent. A narrower trade deficit, a doubling in the inventory increase and more business investment than previously estimated contributed to the improvement in growth. Growth Will Slow Stronger growth in the third quarter implies weaker growth in the fourth quarter due to a partial payback in both trade and inventories,'' Drew Matus, a senior economist at Lehman Brothers Holdings Inc. Reports earlier this month suggested the economy will also have to contend with slower consumer spending and business investment. Americans skimped on furniture and sporting goods in October to offset higher energy costs, leading to a 02 percent increase in retail sales, a Commerce Department report on Nov. Sales were boosted by a 08 percent jump in purchases at service stations that probably reflected higher gasoline prices. Excluding gas, retail sales were up 01 percent, the smallest advance in four months. A Commerce report yesterday showed orders for durable goods fell more than forecast in October, signaling companies are losing confidence the economic expansion will be sustained. Growth estimates for this quarter have dropped since the beginning of the month when the median forecast of economists surveyed by Bloomberg News called for a 15 percent rate of expansion. Lehman Brothers projected the economy would grow at a 06 percent annual pace following the durable goods report and Morgan Stanley's estimate dropped to 03 percent. Tough Out There' It's relatively tough out there, particularly for the consumer and small business,'' Staples Inc. Chief Financial Officer John Mahoney said in an interview on Nov. Declines in home construction have reduced growth since the start of 2006 and detracted 1 percentage point in the third quarter. Homebuilding will drop at a 22 percent annual pace this quarter, the most since the last three months of 1981, according to a Lehman forecast. Retailers Pessimistic Economic growth slowed in seven of the 12 Fed regions, with retailers slightly pessimistic'' about year-end holiday sales, the central bank said yesterday in its regional business survey known as the Beige Book. We are going to have to take a look at'' the stress in credit markets when we meet in a couple of weeks,'' he said. Trading in federal funds futures reflect a 100 percent probability the Federal Open Market Committee will cut rates on Dec. The GDP report's inflation measures were little changed from initial estimates.
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