Barack Obama was right on Friday during his year-end press conference,when he insisted on the very impressive perfomrnace of the US economy. According to the third and final estimates calculated by the Chambe of Commerce, the third quarter growth reached a 5% annualized rate. That’s more than the 3.9% given by the second estimate and is the largest increase since the third quarter of 2003. The upward revaluation is mainly due to household consumption. This economic activity significantly increased from July to September leading to a 3.2% annualized rate of growth. The Americans have spent their disposible income on health, leisure activities and financial services all essential to achieve economic growth. The decline in gasoline prices released funds for many households as well and has proved a blessing for America. Continuous improvement of the labor market, with unemployment falling to 5.8% in November, restores confidence in the future. The savings rate fell in November to 4.4%, its lowest level in eleven months. In the third quarter, business investment in buildings, IT and intellectual property were also higher than previously thought.
A stable ascent?
The question is whether the US economy can continue on this slope, after an already strong growth of 4.6% in the second quarter. The positive outlook for the coming months relies on household consumption. “I think it has now reached a very good dynamic”, believes Michael Feroli the chief economist at JP Morgan Chase. “The energy prices are down, the labor market is in a good phase all of which leads to better conditions for 2015”. In fact, the price of gasoline is at its lowest since May 2009. A fall that releases large amounts of disposible income in households that depend on cars as a means of transportation. The economy created 321,000 new jobs in November, bringing the monthly average of 2014 to 240,910 jobs. According to the University of Michigan which monitors various economic indicators, consumer confidence rose in December to 93.6 points, the highest level since January 2007. The Americans expect the security wage increases of 1.7% to also support their financial chances. Barclays analysts point out that “the improvement of wages increases expectations which should encourage consumer spending in the fourth quarter.” Yet one indicator remains uncertain-investment projects of enterprises, which stagnated in November. This suggests that growth in the fourth quarter will not approach that of the third. Nevertheless, this has not stopped Wall Street to greet the revised growth figures with enthusiasm and optimism, the CAC 40 index increased by 56.46 points to 4310.89 points in Paris. The dollar is also party to the good fortune. Any acceleration in the economy is likely to hasten the movement of interest rates hikes by the Federal Reserve already planned for around mid-2015. Inflation remains an insignificant problem as the Federal Reserve take steps to ensure that it stays below critical level. Therefore one can say that this time, the USA is truly on top of the world.