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Friday, October 1, 1999 Published at 15:17 GMT 16:17 UK


Business: The Economy

US economy resumes growth

US consumers are making big purchases in shopping malls

The US economy is showing renewed signs of growth - spurred by a strong job market.

Consumer spending is now rising at an annual rate of more than 10%.


The BBC's Richard Quest: "US consumers are spending like there is no tomorrow"
Personal spending rose by 0.9% in August, a substantial increase on July's figure of 0.4%.

And personal income rose by 0.5%, compared to 0.2% in the previous month.

Both figures were higher than expected by analysts.

The figures suggest that after a slow second quarter, when the US economy only grew by 1.6%, its lowest in several years, the economy is bouncing back.


Brian Fabbri: "The Fed is probably going to leave rates unchanged"
That could worry the US central bank, the Federal Reserve, which meets next week to set interest rates.

It has already raised rates twice this summer without much effect on consumer spending.

Most observers, including the International Monetary Fund, believe that the US economy, burdened with debt from corporations and households, will have to slow down in the next year.

That level of debt increased even further in August, as the savings rate was negative at -1.5%, for the sixth month in a row.

Consumer spending on durable goods like cars and machines is soaring, boosted by easy credit and the booming stock market.

The boom has also fuelled a growing trade deficit, as imported goods flood into the US to meet the growing demand.

Even the recent pause in stock market growth over the summer has done little to cool off consumer spending.

Consumer spending totals about two-thirds of US gross domestic product and therefore today's figures make it likely that data for the overall economy will show strong growth.

Stronger manufacturing sector

Meanwhile, another set of data have confirmed the strength of the manufacturing sector and again raised the spectre of inflation.

The National Association of Purchasing Managers (NAPM) reported that its index of manufacturing output rose to 3.6 points to 57.8 in September from 54.2 the month before. Any figure above 50 indicates an expansion.

The NAPM's key inflation indicator soared 7.78 points to 67.6, its highest level since June 1995.





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