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Obama says 2014 will be 'breakthrough' for US economy | Obama says 2014 will be 'breakthrough' for US economy |
(about 1 hour later) | |
Citing stronger growth figures, US President Barack Obama says 2014 will be a 'breakthrough year' for the US economy. | Citing stronger growth figures, US President Barack Obama says 2014 will be a 'breakthrough year' for the US economy. |
Economic growth in the US was revised upwards to its fastest pace since late 2011 on Friday. | Economic growth in the US was revised upwards to its fastest pace since late 2011 on Friday. |
The Commerce Department said GDP grew at an annualised rate of 4.1% between July and September, up from an earlier 3.6% estimate. | |
That gave shares a boost and the Dow and S&P 500 indexes closed at records. | |
In his last press conference of the year, the US President highlighted the improving data as promising for the year ahead. | |
"We head into next year with an economy that's stronger than it was when we started the year [and] more Americans are finding work and experiencing the pride of a paycheck," he said. | "We head into next year with an economy that's stronger than it was when we started the year [and] more Americans are finding work and experiencing the pride of a paycheck," he said. |
Much of the revision was due to stronger consumer spending, which accounts for two-thirds of the economy. | Much of the revision was due to stronger consumer spending, which accounts for two-thirds of the economy. |
Business spending was also stronger than previous estimates. | Business spending was also stronger than previous estimates. |
Good week for markets | |
On Wednesday the US central bank, the Federal Reserve, announced it would start to slow its economic stimulus programme because of the improving economy - in particular the falling unemployment rate. | On Wednesday the US central bank, the Federal Reserve, announced it would start to slow its economic stimulus programme because of the improving economy - in particular the falling unemployment rate. |
The central bank said it planned to scale back - or "taper" as it is known in the financial world - its $85bn (£51.8bn) a month bond buying programme by $10bn a month. | The central bank said it planned to scale back - or "taper" as it is known in the financial world - its $85bn (£51.8bn) a month bond buying programme by $10bn a month. |
The Dow Jones Industrial Average rose 3% for the week to close out at a record level on news of the Fed's decision and the stronger economic data. | |
The S&P 500 and Nasdaq also trended higher. | |
Analysts were encouraged by the GDP revision. | Analysts were encouraged by the GDP revision. |
"Not only was third-quarter GDP above 4.0% for only the third time since the expansion began in 2009, the mix of growth looks better (though still not great) than a month ago after the first revision," said Chris Low and Jay Morelock of FTN Financial in a research note. | "Not only was third-quarter GDP above 4.0% for only the third time since the expansion began in 2009, the mix of growth looks better (though still not great) than a month ago after the first revision," said Chris Low and Jay Morelock of FTN Financial in a research note. |
Previously, most of the third-quarter economic growth had come from a build up in business inventories. | Previously, most of the third-quarter economic growth had come from a build up in business inventories. |
This had concerned many analysts, because a build up in inventories doesn't necessarily indicate present demand but a hope for future buying. | This had concerned many analysts, because a build up in inventories doesn't necessarily indicate present demand but a hope for future buying. |
"The strong Q3 growth performance vindicates the Fed's decision to begin tapering QE3," said Sal Guatieri of BMO Capital Markets Economics. | "The strong Q3 growth performance vindicates the Fed's decision to begin tapering QE3," said Sal Guatieri of BMO Capital Markets Economics. |
"It also suggests the economy is poised for stronger growth in the new year than the middling 2% pace of the past year, meaning the tapering process will continue," he added. | "It also suggests the economy is poised for stronger growth in the new year than the middling 2% pace of the past year, meaning the tapering process will continue," he added. |