Cheap gas sparks American boom
THE United States economy rose at a sizzling 5 per cent annual rate in last quarter, the fastest since 2003, fuelled by consumer and business spending.
The surge confirmed the US economy is steadily strengthening and outshining others worldwide.
The news this week helped lift the Dow Jones industrial average above 18,000 for the first time.
In its report on Wednesday, the US Government sharply upgraded third-quarter growth from its previous 3.9 per cent estimate. Much of the rise came from consumers spending on healthcare and firms on structures and software.
Much cheaper fuel has given consumers and businesses more money to spend on other goods and services that drive growth.
Last quarter’s economic expansion was the fastest since summer 2003, and it followed a 4.6 per cent annual rate in the April-June quarter. The government also reported this week that, in November, consumer spending rose at the fastest pace in three months and income at the fastest in five months. Both figures raised hopes for the 2015 economy.
‘‘After four years of rocky recovery the US economy is now hitting its stride, with a notable acceleration in growth in recent quarters,’’ said Gus Faucher of PNC Financial Services Group.
Unexpectedly strong expansion, though, could pressure the Federal Reserve to raise rates, although in- flation remains below its target of 2 per cent, with the Fed trying to raise inflation from excessively low levels since 2008.
The University of Michigan said its index of consumer senti- ment found that US consumers were more optimistic about the economy than at any other time in the past eight years, buoyed by more jobs and falling gas prices.
But two other reports were more cautionary: The government said sales of new homes fell in November, evidence that job gains have yet to boost the housing sector. And it said factory orders for long-lasting manufactured goods slumped last month.
Still, the resurgent economy is putting distance between itself and the ongoing growth struggles of Europe, Brazil, Japan, China and Russia.