- The Washington Times - Tuesday, November 25, 2003

The economy surged 8.2 percent in the third quarter as businesses earned high profits and made robust investments and consumers spent heavily on new homes, cars and other goods, the Commerce Department reported yesterday.

The impressive figures and rising consumer confidence raised hopes that a recovery, which has moved in fits and starts, is on solid footing and that companies are ready to hire more workers.

The growth rate for gross domestic product (GDP), the sum of all goods and services produced within the United States, was revised up from the 7.2 percent reported last month and is the fastest since 1984.

Consumers took advantage of low interest rates and money in their pockets from President Bush’s third round of tax cuts to make major purchases, said Mickey D. Levy, chief economist at Bank of America in New York.

“People had more to spend, and they spent it,” he said.

Consumer confidence rose to its highest level in a year, the Conference Board, an influential business group, reported yesterday.

“The rise in expectations is a signal that consumers will end this year much more upbeat than when the year began,” said Lynn Franco, director of the Conference Board’s consumer research center.

The private research group’s consumer-confidence index rose to 91.7 in November, up from a revised 81.7 in October.

Businesses also had more to spend — investment in new equipment and software grew by 18.4 percent in the third quarter.

With an eye to the 2004 election, administration officials credited President Bush’s economic policy for the robust growth.

“The president’s tax relief is growing our economy even faster than was originally thought,” Commerce Secretary Donald L. Evans said in a statement.

Companies realized high profits during the third quarter, helped by overseas sales. Exports of goods and services increased 11 percent in the third quarter, Commerce reported, an important turnaround for domestic producers.

“What’s held back the recovery in manufacturing is [lagging] investment and exports. This is the first indication those are starting to move,” said David Huether, chief economist at the National Association of Manufacturers, an industry group in Washington.

Manufacturers have continued to shed jobs even as other sectors of the economy started to recover. Mr. Huether said factory employment should begin to pick up in the first quarter of 2004.

Across all sectors, economic recovery has seen only limited job growth — 286,000 jobs were created from August through October — but economists said the latest figures indicate that companies will begin hiring more rapidly. October unemployment was 6 percent.

“The recovery and product demand has been slow and with a few false starts along the way. That led businesses to be very cautious. But now we’re coming around the corner. Things are looking better,” Mr. Levy said.

Businesses also invested heavily, especially in equipment and software, the Commerce Department said.

One of the few areas to show a decline in spending was national defense, which fell 1.6 percent for the quarter, according to the Commerce Department.

Sales of previously owned homes fell by 4.9 percent in October to a seasonally adjusted annual rate of 6.35 million, the National Association of Realtors said. But even with the decline, October’s sales marked the third best month on record and were on track to set a record high for all of 2003.

On Wall Street, the Dow Jones Industrial Average gained 16 points to close at 9,764.

The White House hailed yesterday’s GDP report and said the Bush administration would push Congress for more measures to help business.

“It’s obviously a very positive number and one that will hopefully begin to show increases in jobs,” Claire Buchan, a White House spokeswoman, said yesterday morning from Air Force One.

“The president believes that we still have more work to do to help translate the economic growth into job creation, which is why he is going to continue to urge the Congress to pass his six-point plan, one of which … is medical-liability reform,” Mrs. Buchan said.

The economic growth figures are not expected to continue at the same pace in the fourth quarter, economists said.

Some analysts think the economy is growing at a 4 percent pace in the current October-to-December period, as some of the stimulus that helped in the third quarter — Mr. Bush’s third round of tax cuts and a wave of mortgage refinancing — fades.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2021 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide