Thursday, September 30th 2004 - 21:00 UTC

US economy expands 3,3% in second Q.

The US economy grew at an annual 3,3% rate during the second quarter of 2004 according to the latest release from the federal government. However it's the lowest rate in the last five quarters since the economy expanded 4,5% during the first quarter and 4,8% in the last twelve months to June 2004.

The reviewed second Q indicates a drop in the cost of imports, an increase in inventory accumulation and exports expansion. Inflation on the other hand has remained unchanged.

The statistics are essential for President George Bush who in five weeks time will have to prove that the massive tax cuts imposed during his first four years have helped put the economy back in track, and therefore his chances of a second mandate.

When President Bush took office in 2001 the US economy after a long unequalled decade of sustained growth was faced with recession, and following the terrorist attacks of 9/11 with the wars in Afghanistan and Iraq which have since conditioned the performance of the economy.

Next October 29, a few days before the presidential election, the first estimates of third quarter GDP growth will be made public, and most economists are forecasting an annualized 3,7%.

But the US economy still faces staggering federal budget and trade deficits which have considerably weakened the US dollar against currencies of its main trade partners.

US Treasury Secretary John Snow anticipated that the Bush administration will struggle strongly to bring down the budget deficit which this year is expected to reach 402 billion US dollars.

Interviewed by NBC, Mr. Snow admitted the budget deficit was extremely high, "and we plan to limit it through two main instruments: the growth of the economy and closely controlling expenditure. Working on these two factors we can cut the deficit by half in the next five years".

Mr. Snow revealed that the expanding economy will mean additional non anticipated revenue of 100 billion US dollars, and "we're also working with China for more currency flexibility and intellectual property rights".

The Chinese yuan pegged to the US dollar has impeded US exporters to take advantage of the weaker American currency in the bilateral trade relation with China which still has a growing surplus.

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