Surge in US growth puts Fed on rate alert
Friday 03 May 1996
According to provisional figures from the Commerce Department yesterday, gross domestic product grew by 2.8 per cent, far more quickly than the feeble 0.5 per cent recorded in the last three months of 1995. The strong performance suggests that current forecasts of a bare 2 per cent growth for the year - the IMF last month predicted 1.8 per cent expansion - are decidedly on the conservative side.
The growth seems to have been across the board, led by a surge in consumer spending, up 3.5 per cent, and a 12 per cent jump in fixed corporate investment. The inventory reductions by business which braked the economy in the last part of 1995 also seem to be over, analysts said.
Without the severe weather, including the record blizzard which shut down the North-east for a week in January, and the government lay-offs caused by the protracted budget dispute, growth would have been 0.2 per cent higher still, the Commerce Department estimated.
In a further sign of better times ahead, factory orders also rose strongly in March - by 1.5 per cent, almost double what had been expected by Wall Street.
For the seventh month running, US industry's backlog of unfilled orders rose, by 1 per cent during the month.
For President Clinton the growth resurgence has come at a perfect moment. Not only will it strengthen the White House case that the economy is in capable hands as the election approaches, but should also help to dispel public anxieties over jobs and corporate downsizing.
The one potential area for worry is inflation. While consumer prices are advancing at a modest 2.5 per cent or so, the implicit GDP deflator rose 2.1 per cent in the first three months, up from 1.8 per cent in the last quarter of 1995.
Most of the acceleration reflected a temporary jump in energy prices, but the Fed will be none the less watchful for that.
At the very least, a fourth successive cut in short-term rates now looks out of the question. "The overall level of economic activity is going to get people taking about a Fed tightening," Steve Ricchiuto, financial economist for Barclays de Zoete Weld, commented yesterday.
Diving in at the deep end is no excuse for shirking the style stakes
- 1 Why I'm on the brink of burning my Israeli passport
- 2 War is war: Why I stand with Israel
- 3 L'Oreal cuts ties with Belgium supporter Axelle Despiegelaere after hunting trip photographs
- 4 World Cup 2014: Robin van Persie appears to give his bronze medal to eccentric Netherlands fan moments after being handed it by Sepp Blatter
- 5 Iraq crisis: How Saudi Arabia helped Isis take over the north of the country
Ian Thorpe gay: Olympic swimmer comes out in Parkinson interview
Death in the Valley of the Dolls: Heroin overdose turns the spotlight on prostitution boom in California's tech industry
Supermoon 2014: When and why will the moon look bigger and brighter this summer?
Woman, 61, jailed for seven years after drink-drive death of cyclist
Gaza-Israel conflict: Pro-Palestinian demonstrators take to streets of London, Paris and New York in wave of protests
Sustained immigration has not harmed Britons' employment, say government advisers
War is war: Why I stand with Israel
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Australia facing international condemnation after turning around Sri Lankans at sea
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
iJobs Money & Business
£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...
£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...
£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...
£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...