U.S. Economy Pulled Down

The U.S. economy was dragged down into its weakest growth rate in more than three years, mostly by the droop in the housing sector. The commerce department reported on Friday that the U.S. economy has managed only 1.6 percent annualized growth rate in the third quarter, much weaker than expected.

“Growth was hit by the buzz saw of markedly weaker housing, as residential investment plunged at a 17.4 percent rate on the heels of an already sharp 11.1 percent dive in the prior quarter," said BMO Nesbitt Burns economist Douglas Porter.

U.S. President George W. Bush's approval rating on the economy is at 40 per cent, near the low for his six years in office and the Bush administration quickly sought to downplay the slowdown as predictable and temporary.

"Everybody expected this. You have a combination of rising energy prices and also rising interest rates, and now you've seen a reverse on both," said White House press secretary Tony Snow.

The Republican-controlled Congress was blamed to be doing a poor job handling the economy by the Democrats. "Just because the president looks through his rose-colored glasses and sees a strong economy doesn't make it so," said House of Representatives’ Democratic Leader Nancy Pelosi of California. "He refuses to see the millions of Americans who are working hard and are unable to get ahead."

A number of observers suggested that lots of evidence of fundamental economic strength could be found. "We are feeling the effects of the housing bubble bursting, and while the ill wind is not pleasant, it is not likely to be long lasting," said Joel Naroff of Naroff Economic Advisors.

David Huether, chief economist of the National Association of Manufacturers, sounded similar as he said, “Excluding residential investment, the economy grew by 2.7 percent" in the latest quarter.”

Many analysts forecasted an upswing and predicted that economic growth would rebound in the final three months of this year or, at the latest, the first quarter of 2007.