MercoPress. South Atlantic News Agency

US economy growth dips to an annualized 1.6%

United States economic growth slowed down to 1.6% in the third quarter, the lowest in three years, according to the US Department of Commerce. This compares negatively with the 2.6% of the second quarter and market expectations of 2.1%.

The slump in the US housing market was largely responsible for the loss of economic dynamism with an annual fall in spending of 17.4%. This follows the second quarter 11.1% slump in the housing market, which together signals the largest drop since the beginning of 1991.

Commerce Department figures said that median price for a new home sold in September was 217100 US dollars, 9.7% below that reported in 2005

Analysts said the news meant an interest rate rise from the US Federal Reserve was now unlikely to be imminent - with some predicting a rate reduction as being more probable.

The UK-based Centre for Economics and Business Research (CEBR) said it expected US growth would be revised up slightly but that the picture remained "one of a controlled economic slowdown".

"Weak GDP figures will likely give the markets something to worry about, although on the other hand, they will raise expectations that the next move in interest rates will be down," said CEBR senior economist Jonathan Said.

In its latest open market meeting the Fed decided to leave the basic rate unchanged for the third month running at 5.25%, admitting that some "inflation risks remain".

"Economic growth has slowed over the course of the year, partly reflecting a cooling of the housing market. Going forward, the economy seems likely to expand at a moderate pace" reported this week the Fed.

Some analysts following on this statement are forecasting that the US economy buoyed by consumer spending and lower fuel prices could begin to pick up and end the fourth quarter with a 3% growth.

The Fed's FOMC said readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures. However, "inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand".