US Economic Growth At 4% On Second Quarter

The US economy has seen some rare good news, with the announcement that its economy grew beyond analyst expectations over the second quarter despite the ongoing unrest in the sub-prime lending sector.

In figures released today by the US Commerce Department, the US economy was said to have grown at an annual rate of 4% over the second three month period of the year, compared to just 0.6% in the first quarter of the year.

Analysts had widely predicted that the economy would have grown over the period, but only by 3.4%, suspecting the problems in lending and a less ready supply of credit to hamper growth over the period.

On the back of today’s results, analysts are now forecasting growth for the remaining six months to fall, with excessive worry and apprehension in the lending markets likely to hit business growth.

With lenders facing growing defaults and consequently liquidity difficulties, capital investment is likely to be less readily available, having a knock on effect on both consumers and businesses planning expansion.

Despite the positive news, US markets failed to be inspired with confidence remaining rock bottom from the sub-prime fallout. Morning trade soon fell back into red, after a brief flurry into positive trading.

Additionally, with the market facing a credit crunch environment, investors are taking a step back from risky stock investments as businesses look set to feel the heat.

It is widely held that the Federal Reserve will continue to cut interest rates at the next available opportunity, despite today’s news, which is not likely to be strong enough to prevent the move.

Experts are hoping that a cut in interest rates could stimulate further growth within the US economy, whilst helping to ease the tight-credit environment and liquidity shortage plaguing major lenders.

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