The U.S. economy grew at a 4 percent annual rate in the third quarter, nearly a full percentage point faster than originally estimated, the Commerce Department reported yesterday. But many forecasters expect growth to drop back to a 1.5 percent rate or less in the final three months of the year, continuing the seesaw pattern since last year's economic slump ended.
Yesterday, for example, the National Association for Business Economics said that over the past two months its panel of 33 forecasters has become less optimistic about the economic outlook, trimming its prediction for the fourth quarter to only a 1.4 percent annual rate. The forecasters' expectation for growth in the first three months of next year is a better, but still subdued, 2.5 percent rate.
"Unresolved economic problems, specifically a hangover from the late 1990s [business] investment bubble plus the need for families to rebuild their savings, are likely to keep U.S. growth below a 3 percent rate through the first quarter of 2003," said NABE President Tim O'Neill, chief economist for BMO Financial Group.
Even if growth strengthens later next year, as the panel expects, the acceleration will not be great enough to lower the nation's current 5.8 percent unemployment rate, the NABE said.
Commerce said the major reasons for the upward revision in growth was newly available data showing increased business inventories and a declining U.S. trade deficit with other countries.
Yesterday's report also noted that after-tax corporate profits rose at a 2.1 percent annual rate for the third quarter but were still 1 percent lower than they were in the same quarter a year ago.
Meanwhile, the consistently brightest spot in the economy, housing, continued to shine last month. Commerce said that sales of new homes slipped 4.5 percent last month, to an annual rate of 1.007 million. But that also meant that sales, which before August had never topped a 1 million annual rate, now have done so for three months in a row.
The average price for new homes rose last month to $225,100, up 8.7 percent since October of 2001. At the same time, the median price of new homes -- that is, the price at which half the homes cost more and half cost less -- reached $176,700, up only 3.2 percent in the past 12 months. That means a growing share of new homes are carrying higher price tags.
In a third report, the Conference Board, a New York-based business research group, said its monthly survey of consumer confidence rebounded to 84.1 this month from last month's 79.6 reading -- the lowest in nine years. Most of the improvement came in consumers' expectations for the economy rather than in their assessment of current conditions. Some analysts believe consumer expectations are heavily influenced by the course of the stock market, which has improved significantly in recent weeks.
"The rebound in expectations suggests consumers do not expect economic conditions to become worse," said Lynn Franco, director of the Conference Board's Consumer Research Center. "This comeback, combined with . . . upbeat forecasts for Christmas spending, signals a brighter holiday spending season than was anticipated only a month ago."
The board said consumers regarded the employment outlook more favorably this month than in September. The share of respondents expecting fewer jobs to be available over the next six months declined to 18.9 percent, from 22.1 percent, while those expecting more jobs to be available held steady at 15.3 percent. In addition, 19 percent of the respondents said they expect a rise in their incomes; 17.9 percent thought so last month.
Yet another report contained less good news. The Labor Department said 1,497 companies reported laying off at least 50 employees in October, up from 1,062 companies in September. Last month's figure was the highest since June. The data are not adjusted for seasonal variations, however, so month-to-month comparisons may not be evidence of a trend.
Indeed, tracking instances of such significant layoffs over 12-month periods shows that the number appears to be trending downward, analysts said.