Free-spending American consumers are propelling the economy into next year at high speed, even after a 19-year record growth spurt in the third quarter, analysts said Tuesday.
Gross domestic product (GDP) expanded at an annualized 8.2 percent pace in the third quarter, a second and final revision of US Commerce Department figures showed.
It was the briskest pace since 1984.
Consumer spending surged at a 17-year record pace of 6.9 percent in the quarter, even faster than first thought, with spending on durable goods such as automobiles up 28 percent, based on the most recent report.
And consumers, whose expenditure accounts for two-thirds of activity in the world's largest economy, still appeared to be splashing out in the last stretch of the year.
Spending by consumers rose 0.4 percent last month and their incomes were boosted 0.5 percent, helped by jobs growth and sharp productivity gains, the Commerce Department said in a separate report.
Industry data confirmed the shopping spree.
A barometer of sales at retail chain stores drawn up by the International Council of Shopping Centers (ICSC) and UBS Warburg climbed 0.6 percent in the week ended Dec. 20 when compared with the previous week.
In another positive sign for retailers, a survey by the University of Michigan showed consumers kept their spirits up in the run-up to Christmas, a critical sales period.
A consumer sentiment index based on the survey eased only slightly, to 92.6 points late this month from 93.7 last month. A preliminary estimate earlier in December had shown an unexpected dip in the index.
Wall Street barely budged on the news. The Dow Jones Industrials Average of 30 top stocks rose 3.26 points or 0.03 percent to close at 10,341.26.
US consumer spending would have to slow a little from the stunning third-quarter pace, BMO Financial Group senior economist Sal Guatieri predicted.
But the economy would still expand 4.5 percent in the last quarter of 2003, faster than the "potential rate" -- the maximum speed an economy can grow over the medium term without creating inflation, he said.
"It should be enough to create some jobs in this economy, even if productivity growth remains healthy," Guatieri said.
Next year, he forecast annual US economic growth of 4.6 percent, boosted by super-low interest rates, the sliding US dollar propping up exports, tax cuts, rising share prices and the red-hot housing market.
People appeared determined to spend even in bad weather, said Naroff Economic Advisors president Joel Naroff.
"In spite of the incredibly strong third-quarter [consumer spending] numbers, it looks like fourth-quarter numbers are going to be solid," he said.
Last month's consumer spending report showed that prices paid by consumers had dipped 0.1 percent.
The lack of inflationary pressures almost eliminated the prospects for an early next year rise in key short-term interest rates, which now lie at a 45-year low, Naroff said.
"Basically, inflation that may have stabilized during the summer is back down to absolutely nothing," the economist said.
The Federal Reserve was now unlikely to take any action in the first two meetings of next year -- in January and March -- leaving the federal funds target rate at 1.00 percent, Naroff said.
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