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Last Updated: Thursday, 21 December 2006, 14:06 GMT
Slow house market hits US growth
Newly finished homes in Texas
Interest rate increases are taking a toll on demand for new houses
The US economy has grown more slowly than first forecast in the three months to the end of September as a weaker housing market hit consumer confidence.

Gross domestic product (GDP) rose by 2% in the third quarter, down from the 2.2% figure predicted a month ago, according to Commerce Department data.

In the previous three-month period, the second quarter, growth was 2.6%.

Recent rises in interest rates have heightened fears about the outlook for the US economy, the world's largest.

'Going forward'

"These are old numbers, that's the best way of looking at it," said Andy Busch of BMO Capital Markets.

"I think going forward for the fourth quarter we're not going to have that theme drag on the US economy. We're not going to see a dramatic rebound but we're not going to see further drops from here because it's so low."

In November, the Commerce Department said that the number of new US homes being built had fallen to a six-year low.

According to the figures, about 1.48 million houses were started in October, 14% down from the previous month and 27.4% lower than a year ago.

At the same time, the number of permits awarded for future housing projects fell to its lowest level since 1997.

Interest rates have been on hold at 5.25% for the past few months, but till then the Federal Reserve raised the cost of borrowing steadily in order to combat increases in the price of energy and petrol - themselves boosted by record crude oil costs.

Analysts are not predicting a further interest rate increase, though they said much would depend on external price pressures.


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