30 August, 2008

According to figures from the Commerce Department, the US economy rose at a revised 3.3% annually in the second quarter of 2008 against a previous estimate of 1.9%.

Analysts believe this may reduce the risk of downturn in the economy. Avery Shenfeld, senior economist at CIBC World Markets, disagree that the US is still an economy that faces slow times but not a slump.

Government tax rebates have gained spending with the surprise due to strong US exports, boosted by the weak dollar.

Consumer spending, due to the government’s $600 tax rebate payments, added by 1.7%, marginally above the 1.5% reported in the previous quarter.

Exports increased at an annualized rate of 13.2%, more than the government’s initial estimate of 9.2%.

In the first quarter, Gross Domestic Product (GDP) added at a rate of 0.9% following a 0.2% reduction in the final quarter of last year.

However, according to the Federal Reserve, the economy will stay weak this year.

John Wilson, equity strategist at Morgan Keegan, said there does seem to be a light at the end of the channel although the US is not out of the woods yet.

In related news, the latest S&P/Case-Shiller survey of US national home prices, established that property prices in the US showed a decline of 15.4% in the second quarter of 2008 as compared to the same quarter in 2007.

According to a report it was revealed that the fact that the downturn in house prices were nationwide suggests that the housing market recession is continuing in America.

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