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WORLD / America
US economy grows at fastest pace in a year
(AP)
Updated: 2007-08-30 22:29
WASHINGTON - The US economy grew at its strongest pace in more than a
year during the spring as solid improvements in international trade and
business investment helped offset weakness in housing.
Nicole DeMarco, left, shops at Steve & Barry's store on Thursday, Aug.
16, 2007 in New York. Consumer confidence weakened in August as volatile
financial markets and housing problems took a toll, a private research
group said Tuesday, Aug. 28, 2007. [AP]
The gross domestic product, the broadest measure of economic health,
expanded at an annual rate of 4 percent in the April-June quarter,
significantly higher than the 3.4 percent rate the government had
initially estimated a month ago, the Commerce Department reported
Thursday.
But the growth spurt could be short-lived. There are concerns that the
recent turmoil in financial markets, a result of a spreading credit
crisis, could seriously dampen economic activity in the second half of
this year.
GDP growth may have slowed to just above 2 percent in the current quarter
and many analysts believe growth will slow even further in the final
three months of this year as the full impact of the recent market turmoil
is felt.
The worry is that the roller coaster ride in stocks and spreading credit
problems will shake consumer and business confidence and cause cutbacks
in spending and hiring plans.
However, analysts believe the?US?Federal Reserve will act to avert a
full-blown recession. If financial turmoil persists, they think the Fed
will wield its major policy tool, cutting its target for the federal
funds rate, the interest that banks charge each other. That rate has been
at 5.25 percent for more than a year, but investors are starting to hope
that the Fed will begin reducing it in quarter-point moves starting at
their next meeting on Sept. 18.
The Fed on Aug. 17 cut a less economically significant rate, its discount
rate, and has injected billions of dollars into the banking system in an
effort to keep credit markets operating in the face of the turmoil. US
Federal Reserve Chairman Ben Bernanke may offer hints about the Fed's
next policy moves when he delivers remarks at a Fed conference on Friday.
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