US GDP growth revised up to 2.2%

Friday 26 January 2007 20.30
US GDP growth revised up to 2.2%

The US economy held up better  than expected in the third quarter, expanding at a 2.2% pace, according to a new official estimate today that supports the notion of a 'soft landing'.

The Commerce Department figure compared with last month's  estimate of a 1.6% growth pace over the July-September months, and was stronger than the average Wall Street estimate of 1.8% growth. It was, however, the weakest growth pace since late 2005, and a deceleration from the second quarter's 2.6% growth rate for gross domestic product.

But analysts said the report offered further evidence of the 'soft landing' hoped for the US economy as a result of 17 interest rate hikes by the Federal Reserve aimed at cooling inflation.

The Commerce Department's second estimate for the July-September quarter showed improvement as a result of a downward revision of  imports, and a higher estimate for business investment.

Non-residential fixed investment grew 10% in the new estimate, with equipment and software spending adding 0.52 points to growth after subtracting 0.10 points in the second quarter.

The weakness in the economy was due in large part to a sharp 18% drop in fixed residential investment, reflecting the slumping real estate market.

Consumers held up their share of economic activity with a 2.9% increase in spending, although that figure was revised down slightly from a prior estimate of 3.1%.

An inflation index linked to GDP showed a 2.4% rise, down slightly from last month's estimate of 2.5%. The core rate of  inflation, excluding food and energy, was 2.2%, revised down from 2.3%.