WASHINGTON, Dec 20: The United States confirmed on Friday the economy grew at a 4-per cent pace in the third quarter, but analysts said deep concerns now overshadow the outlook as Iraqi war clouds gather.

“What is overarching all of the economy is political issues, not pure economic issues,” Naroff Economic Advisors chief economist and president Joel Naroff said.

“Those political issues are not positive for the economy. What you have is a battle going on between the fundamentals, which are keeping the economy going, and the politics, which is creating a slowdown.”

Gross domestic product expanded at a 4 per cent annualized rate in the third quarter, the Commerce Department said in its second and final revision to the data.

Although that pace is considered solid, most economists expect growth to slow to about half of that in the final quarter, however.

Wall Street welcomed the figures. The Dow Jones industrials average of 30 top stocks rose 87.15 points, or 1.04 per cent, to 8,451.95 in the late morning.

Federal Reserve chairman Alan Greenspan said late Thursday the economy appeared to be still working its way through a “soft patch” after a rate cut in November.

Uncertainties over Iraq and the business outlook were restraining investment, a critical ingredient to faster economic growth, he said. When those concerns cleared, he said, growth might accelerate.

“The limited evidence since the November easing has supported our view that the US economy has been working its way through a soft patch,” Greenspan told the Economic Club of New York.

“And the patch has certainly been soft.”

Greenspan warned that uncertainties about the business outlook and about the geopolitical situation were a hurdle to investment, a critical ingredient in a recovery.

“These considerations at present impose a rather formidable barrier to new investment,” he said.

St. Louis Federal Reserve Bank William Poole, speaking to a management association in St Louis on Friday, said flexible markets, high productivity and low inflation were lynchpins for a solid recovery in 2003-2004.

But the pace of the economic recovery depended on business investment, Poole said.

“The timing of the recovery in fixed investment is very uncertain, owing to some key factors,” Poole said.

Those factors included “a guarded outlook for corporate profits, uncertainties associated with a possible war with Iraq and the threat of future terrorist attacks occurring on US soil or affecting US interests abroad.”

The Federal Reserve could cut rates again, he said. “If necessary, there is room to cut the federal funds rate target some more” or find other ways to ease monetary policy.

Naroff agreed with Greenspan that businesses would remain cautious until the US-Iraq showdown was resolved.—AFP