December 22, 2006	Friday	Ziqa’ad 30, 1427

WASHINGTON, Dec 21: US economic growth was a bit more sluggish than earlier estimated in the third quarter, growing at a 2.0 per cent annualised pace, according to revised data released on Thursday.

The Commerce Department, in its final revision of growth in the July-September quarter, notched down its earlier estimate of a 2.2 per cent annualised pace.

Wall Street analysts had on average expected no revision from the 2.2 per cent figure.

In any case, the growth was the slowest since the final quarter in 2005 and a deceleration from the 2.6pc pace in the second quarter.

The revision came from a slight downward adjustment in the estimate of consumer spending growth in the quarter to 2.8 per cent instead of 2.9 per cent.

The department said the slowdown in consumer spending was driven by better data on medical care spending, which was revised lower, and by a steeper slump in real estate spending.

That offset slight upward revisions to durable goods spending.

The latest revision left unchanged the picture of an economy that has shifted to a slower growth pace, held back by slumping real estate but still underpinned by consumer and business spending.

Spending on residential property plunged 18.7 per cent, revised from an earlier estimate of an 18 per cent drop, the steepest drop since 1991.

Nariman Behravesh, chief economist at Global Insight, said however that despite the troubled housing sector, “the spillover effects to other parts of the economy continue to be limited.”

Business investment grew 10 per cent, unrevised from the last estimate.

An inflation index linked to GDP showed a 2.4 per cent increase in prices, and was unrevised after a four per cent jump in the second quarter.

Core prices excluding food and energy were up 2.2 per cent, slightly ahead of the Federal Reserve’s unofficial target but suggesting that the central bank’s view of easing inflationary pressures is correct.

The Fed, which halted a string of rate increases in August, has indicated it may lift interest rates further if inflation kicks back up, but most economists see the next move as a rate cut to help stimulate flagging growth.

Robert Brusca at FAO Economics said the GDP report also lowered the estimate for US productivity.

“GDP is old news, but what stings in this report is the marginal lowering of already weak productivity growth that will result from weaker GDP,” he said.

“Weak productivity growth is bad news, and even weaker growth is worse news -- even if it is a marginal revision. This revision does not obviate or reduce but rather worsen this new trend.”

While some analysts say the GDP data is backward-looking, the Conference Board said its index of leading economic indicators rose 0.1 per cent in November, suggesting more sluggish growth ahead.—AFP