Economic Growth "Unstoppable"
Seems to be good news all around. If we could curb the federal budget deficit, we'd be set.
The economy is proving as unstoppable as the 11-0 Indianapolis Colts. Consumers have kept spending even in the wake of sharply higher energy prices and after their confidence was pummeled by this summer's hurricanes. And despite initial worries over demand generated by the storms and oil hikes, businesses continue to invest in new equipment and add to their payrolls.
The economy's resilience is especially evident in the latest update on growth from the Bureau of Economic Analysis. The BEA's second look at third-quarter gross domestic product showed that the economy grew by a robust 4.3% annual rate, even with the business shutdowns caused by Hurricanes Katrina and Rita. And real
GDP in the fourth quarter appears to be increasing at a healthy pace of greater than 3%. For all of 2005, real GDP is on track to expand by 3.7%.
That's a bit higher than the 3.5% projected by the economists surveyed by BusinessWeek at the end of 2004. But what's more revealing is that the consensus forecast was predicated on oil prices slipping back to $39 per barrel by now and the
Federal Reserve hiking its target for the federal funds rate to only 3.4% by yearend. Instead, oil remains well above $55 and fed funds have already reached 4%, with more hikes on the way.
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