With the end of 2013 comes the final set of quarterly figures for growth, or otherwise, in the world’s economies. The figures will emerge as we head into the New Year and be subject to revisions as further data becomes available, firming up the original estimates. This process has just happened for the USA’s performance in Q3 of this year.
Q3 growth data for the world’s largest economy has been revised upwards from 3.6% to 4.1% making Q3 the period of strongest growth in the US economy seen since the end of 2011. The better performance was linked to revised consumer spending figures – a key indicator since the domestic market consumes about 70% of US output. Investors reacted well to the news with both the Dow Jones Industrial Average and the S&P 500 indexes closing at record highs in the run-up to the festive period.
President Obama seized on the data as signalling that 2014 will be a “breakthrough year” for the US economy – presumably when the recovery will gain strength and finally really kick-in with substantial job creation. "We head into next year with an economy that's stronger than it was when we started the year more Americans are finding work and experiencing the pride of a paycheck," he said. In view of the jobs that have been shed since the Global Financial Crisis struck, he might have been better to add the word “again” to his statement.
The Federal Reserve will cut back on its QE measures from next month with the asset purchasing programme being pared back from $85 billion per month to $75 billion. Forward guidance suggests that interest rates will remain unchanged until unemployment dips below the 6.5% mark, however, it is stressed that the level represents a threshold below which interest rates might be increased, if economic conditions warrant it, but it is not a trigger point.