US economic growth soars

The US economy rocketed ahead in the three months to September, fuelled by a consumer spending spree and the long-awaited return of business investment.

During the third quarter the economy expanded at a rate which - if it lasted for a year - would equate to 7.2%, more than twice the rate in the previous three months and far ahead of what most observers had expected.

The engine for the expansion - the biggest quarterly figure since 1984 - was a 6.6% rise in consumer spending, the Commerce Department said, boosted by tax cuts and credits.

But despite the massive boost to the economy, some economists are warning that growth - forecast at about 4% for the final quarter and into next year - could stumble if the US's jobs drought continues.

Almost 3 million jobs have gone since 2001 despite a surge in productivity, reflecting companies' decision to work staff harder rather than expand payrolls.

Future expansion could depend on whether or not the growth translates to hiring at long last, economists predict.

Broad-based

It was not just consumers splashing out on big-ticket items such as cars who were egging the economy on at such a blistering speed.

Businesses, too, found themselves spending with an enthusiasm last seen before the US recession began in 2001.

Business investment was up 11.1% in the quarter, driven by growth of more than 15% over the previous year in spending on equipment and computer software - although companies still seemed wary of building up stocks, demonstrating some caution about future prospects.

Another element in the breakneck pace of growth was an expansion in the amount of US-sourced, rather than foreign, goods being sold, as the gap between imports and exports narrowed.

Government spending also helped, albeit without the massive boost in defence spending which which supplied much of the 3.3% growth in the second quarter of this year.