The U.S economy grew by 1.6% for the quarter ending September 2006, the slowest growth rate in three years, because of widening trade deficit and plummeting housing demand. The government’s first estimate of the GDP for the quarter ending September, for this largest economy of the world, showed a decline in annual growth rate from 2.6% seen in the previous quarter. Slumping housing demand and an ever widening trade deficit are the main reasons for this slow down, but gains in consumer and corporate spending could help the U.S economy in achieving a moderate growth this year. Residential housing construction fell by 17.4% annual rate, the steepest decline in the last 15 years. Trade deficit widened to $639.9 billion in this quarter, fuelled by the increased spending on foreign-made consumer goods, when compared to $624.2 billion for the quarter that ended in June 2006. These two factors accounted for 1.70 percentage point loss in the GDP.

Robert Mellman, an economist at J.P. Morgan Chase &Co., in New York, said that the growth in consumer spending and business fixed investments coupled with the falling crude prices, could accelerate the American economy in third quarter (from October to December 2006). Many economists believe that there may not be a drastic slump in the U.S economy, as the growth in rest of the economy could negate the effect of trade deficit and falling housing demand.

The GDP of the American economy was worth 12.41 trillion dollars in the year 2005.

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