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US economy is growing once again US economy is growing once again
(30 minutes later)
The US economy grew at an annual pace of 3.5% between July and September, its first expansion in more than a year, official data has shown. The US economy grew at an annual pace of 3.5% between July and September, its first expansion in more than a year.
Analysts say the growth was helped by the "cash for clunkers" car scrappage scheme, and the fear is growth will now fall after this ended in August. The growth was helped by a substantial government spending plan, including a scrappage scheme to boost car sales.
The US economy was also lifted by President Obama's $787bn (£480bn) economic stimulus plan. The official figures indicate recession has ended, but some economists think there could be further setbacks.
But with unemployment still high, the ongoing recovery is set to be slow. The White House said it was "a welcome milestone", but stressed it would be some time before the economy made a full recovery.
Compared with the previous three months, the US economy grew by 0.9%. In the same period, and on the same measure, the UK economy unexpectedly stayed in recession after it shrank by 0.4%.
Global good newsGlobal good news
The economic growth between July and September indicates that the US has likely exited a recession that first started in December 2007.
I've been out of work a few months here or there but never like this Unemployed American Jon Polis Pain continues for some Mardell: Where hope is all that's left
However, the official confirmation still has to come from the National Bureau of Economic Research, the agency which considers a number of factors in coming to its decision.
The US economy last expanded in the second quarter of 2008, when it grew 2.4%.
BBC chief economics correspondent Hugh Pym said the 3.5% annualised growth rate was more than the 3.3% expected by most commentators.BBC chief economics correspondent Hugh Pym said the 3.5% annualised growth rate was more than the 3.3% expected by most commentators.
I've been out of work a few months here or there but never like this Unemployed American Jon Polis Pain continues for some Mardell: Where hope is all that's left
"The sheer scale of the stimulus in the US has made a big difference, it was much bigger in percentage terms than that in the UK," he said."The sheer scale of the stimulus in the US has made a big difference, it was much bigger in percentage terms than that in the UK," he said.
"That the US, the powerhouse of the world economy is growing once again, is good news for the global economy has a whole.""That the US, the powerhouse of the world economy is growing once again, is good news for the global economy has a whole."
It is the first time US economy has last expanded since the second quarter of 2008, when it grew at an annual pace of 2.4%.
Official confirmation of whether the US is in or out recession will come from the National Bureau of Economic Research, the agency which considers a number of factors in coming to its decision.
Numerous boostsNumerous boosts
The figures from the Commerce Department showed that a number of factors helped to lift the economy during the third quarter.The figures from the Commerce Department showed that a number of factors helped to lift the economy during the third quarter.
This recovery is being led by federal spending and gradual recovery in consumer spending and business investment John Silvia, Wells Fargo Head to head: What next for US economy?This recovery is being led by federal spending and gradual recovery in consumer spending and business investment John Silvia, Wells Fargo Head to head: What next for US economy?
Spending on durable manufactured products soared at an annualised rate of 22.3%, the highest quarterly amount since 2001, led primarily by the impact of the cash for clunkers scheme lifting car sales.Spending on durable manufactured products soared at an annualised rate of 22.3%, the highest quarterly amount since 2001, led primarily by the impact of the cash for clunkers scheme lifting car sales.
The housing market also improved, with spending on housing products up 23.4%, its largest quarterly jump in 23 years.The housing market also improved, with spending on housing products up 23.4%, its largest quarterly jump in 23 years.
Analysts said this big leap was sparked by the government's $8,000 tax credit for first-time house buyers.Analysts said this big leap was sparked by the government's $8,000 tax credit for first-time house buyers.
Meanwhile, total government spending was up 7.9%, as the wider stimulus spending continued to take effect.Meanwhile, total government spending was up 7.9%, as the wider stimulus spending continued to take effect.
In addition, exports were also up strongly, increasing 21.4%, the biggest rise since 1996.In addition, exports were also up strongly, increasing 21.4%, the biggest rise since 1996.
'Distorted by stimulus''Distorted by stimulus'
WHAT IS GDP? Gross Domestic Product, or GDP, measures the value of goods and services produced in a country, reflecting the health of the economy in one number.The US uses a measure called annualised GDP, which takes the change over a three-month period and works out what the annual change would be if it continued at that pace over a whole year.This latest figure is the first estimate for the three-month period between July and September. It will be revised twice in coming months.WHAT IS GDP? Gross Domestic Product, or GDP, measures the value of goods and services produced in a country, reflecting the health of the economy in one number.The US uses a measure called annualised GDP, which takes the change over a three-month period and works out what the annual change would be if it continued at that pace over a whole year.This latest figure is the first estimate for the three-month period between July and September. It will be revised twice in coming months.
"It's good to have the economy growing again," said Brian Bethune, economist at IHS Global Insight."It's good to have the economy growing again," said Brian Bethune, economist at IHS Global Insight.
"But we don't think that rate of growth is sustainable because it is distorted by all the government stimulus."But we don't think that rate of growth is sustainable because it is distorted by all the government stimulus.
"The challenge here is to get organic growth - growth that isn't helped by fiscal steroids.""The challenge here is to get organic growth - growth that isn't helped by fiscal steroids."
Analysts cautious about the slow nature of the US economic recovery point to the fact that the unemployment rate currently stands at 9.8%, and that the labour market traditionally lags behind any wider economic recovery.Analysts cautious about the slow nature of the US economic recovery point to the fact that the unemployment rate currently stands at 9.8%, and that the labour market traditionally lags behind any wider economic recovery.
They also highlight the fact that the big car firms have already reported a sharp fall in September sales following the conclusion of the popular $3bn cash for clunkers scheme at the end of August.They also highlight the fact that the big car firms have already reported a sharp fall in September sales following the conclusion of the popular $3bn cash for clunkers scheme at the end of August.
"You can say that the recession is over, but it sure won't feel like that," said Dean Baker, co-director of the Centre for Economic Policy Research."You can say that the recession is over, but it sure won't feel like that," said Dean Baker, co-director of the Centre for Economic Policy Research.
"There is a lot of downward momentum that isn't going to go.""There is a lot of downward momentum that isn't going to go."