End-of-year spurt rescues US economy

Washington: Just a few months ago, the economy seemed to be skidding towards another recession.

Now, a continued drop in jobless claims, a rise in consumer confidence and other signs of a growing recovery are cheering economists as the year draws to a close.

"The economy has clearly re-accelerated at year's end," said Mark Zandi, chief economist at Moody's Analytics. "It kind of stalled out midyear through the debt ceiling debacle and right up until September. But in the last three months, it's really started to pick up and that's encouraging."

Still, economists project growth to slow again somewhat early next year as the European debt crisis starts taking its toll and some temporary boosts, such as manufacturers replenishing inventory, wear off.

Economists also warned growth could dip further if officials in Washington fail to extend the payroll tax cut and long-term unemployment benefits. Both were extended for two months by the Senate last week, but for several days Republicans in the House balked at doing the same. On Thursday, House Republican leaders agreed to support the temporary extension.

Consumer confidence plummeted during the summer, while officials in Washington fought bitterly over raising the debt ceiling and Standard & Poor's downgraded the US credit rating for the first time.

The midyear economic stall was deeper than originally thought, the government said on Thursday. The Commerce Department revised its estimate of annualised growth to a sluggish 1.8 per cent from July through September, below expectations and down significantly from an earlier estimate of 2.5 per cent.

But economists said the data simply confirmed that the summer was not kind to the economy and highlighted how much things have improved since.

Growth has picked up steam through the autumn as dropping gas prices put more money in consumers' pockets and businesses rebuilt their inventories.

Economists project the annualised growth rate from October through the end of the year could be as high as four per cent.

Helping fuel that recovery is continued improvement in the job market. New jobless claims declined again last week, falling to 364,000, the lowest level since April 2008, the US Labour Department said on Thursday.

The four-week average of 380,250 is below the 400,000 figure economists say is key to reducing unemployment.

— Los Angeles Times