US economy in surprise 3.3% growth

According to figures from the Commerce Department, the US economy grew at a revised 3.3% annually in the second quarter of 2008 against a previous estimate of 1.9%.

Analysts believe this makes recession less likely. Avery Shenfeld, senior economist at CIBC World Markets, argues that the US is still an economy that faces slow times but not a recession.

Government tax rebates have increased spending with the surprise owing to strong US exports, boosted by the weak dollar.

Consumer spending, due to the government’s $600 tax rebate payments, increased by 1.7%, marginally above the 1.5% reported in the previous quarter.

Exports grew at an annualised rate of 13.2%, exceeding the government’s initial estimate of 9.2%.

In the first quarter, Gross Domestic Product (GDP) grew at a rate of 0.9% following a 0.2% contraction in the final quarter of last year.

However, according to the Federal Reserve, the economy will remain weak this year.

John Wilson, equity strategist at Morgan Keegan, said there does seem to be a light at the end of the tunnel although the US is not out of the woods yet.

In related news, the latest S&P/Case-Shiller survey of US national home prices, established that property prices in the US were down a record 15.4% in the second quarter of 2008 compared to the same quarter in 2007.

The report said the fact that the decline in house prices were nationwide suggests that the housing market downturn is continuing in America.

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