US GDP at the Slowest Growth in More Than 3 Years

October 27, 2006 at 9:28 am (Economics, US)

Even the Fed holds the interest rates stable, the economy growth still slows to the lowest, mostly driven my the shrinking investment on property. Investment on homebuilding fell by the largest since 1991.

Depending on the inflation rate and the unemployment rate, the Fed might have to consider to act on the opposite direction–raise the rate to avoid a possible stagflation.

 

From AP

Stocks fell Friday after the Commerce Department reported that the economy grew at the slowest pace in more than three years.

While investors expected the reading on gross domestic product would show growth to be slowing, the report stirred concern that a cooling in the housing market would spill over into other parts of the economy.

The GDP, the broadest measure of the economy, showed growth slowed to 1.6 percent in the third quarter; economists had been expecting a 2.1 percent expansion. The report identified the slowing housing market as a significant drag on growth, as money pumped into homebuilding fell by the largest amount since 1991.

“The fact that there is a moderate pullback tells you that the overall market risk is not extreme,” said Subodh Kumar, chief investment strategist for CIBC World Markets, referring to the strength of the market’s ability to digest the GDP news.

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