Economists are hastily upgrading their forecasts for the US economy after a series of surprisingly strong reports suggesting the so-called "soft landing" may be over and growth is accelerating.
Over the past week, surprises have come in stronger-than-expected reports on US job creation, trade balance and retail sales -- all key contributors to economic activity.
Lehman Brothers chief US economist Ethan Harris on Friday boosted his forecast for fourth quarter of last year's growth to an annualized rate of 3.3 percent, a leap from the firm's prior call for just 2.0 percent growth.
"After slowing in November, the economy seems to have regained its stride," Harris said.
"With the last of the major data in, we are now revising fourth quarter GDP to an above-trend 3.3 percent. A wide range of indicators have been stronger than expected. Most important have been the strong consumption data and the surprising improvement in the trade balance," he added.
The latest data defied predictions that the slump in real estate would filter into other areas of the economy, notably consumer spending.
The latest data showed US employers added a healthy 167,000 new jobs last month, with unemployment holding at a low 4.5 percent. Average wages were up 4.2 percent annually.
A separate report on Friday showed US retail sales increased 0.9 percent last month.
Retail sales are closely watched as consumer spending accounts for about two-thirds of US economic activity. Some analysts have said that slumping housing prices may crimp spending in a reversal of the so-called wealth effect.
The higher retail sales "will juice up overall real growth in the fourth quarter to about 3 percent -- a substantial improvement from only 2 percent in the third quarter" said Brian Bethune at research firm Global Insight.
Even the US trade deficit -- long a source of weakness -- improved in the latest report to US$58.2 billion in November, as exports increased.
The data eased pressure on the US dollar and lifted the stock market to fresh highs.
The downside of the data was that it meant the Federal Reserve was unlikely to cut interest rates soon.
But some analysts say the strong data may be distorted by mild weather and drops in energy costs.
"Some of this strength, however, should prove illusory," said Wachovia Securities economists in a research note.
"Housing and motor vehicle production are still major drags on output, with residential construction expected to slice another percentage point off fourth quarter growth and declines in motor vehicle output slicing off another percentage point," the note said.
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