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...investment, relatively robust consumer spending a strong contribution to growth from net trade. Consumer spending growth remained strong in October and November, up by 2.8 per cent relative to a year earlier. Even with a decline in consumer spending in December, we expect annualised growth in household consumption of at least 2 per cent in the final quarter of 2007 as a whole. Spending on durable goods rose particularly rapidly in October and November, up 6 per cent from a year earlier, which belies the frequently cited evidence that credit conditions for consumers had tightened. Indeed consumer credit continued to rise in the final quarter of the year, and interest rates for new car loans and personal credit card plans were lower in November than in the third quarter of 2007. US export growth also remains strong, with exports in the first three quarters of 2007 up 8 per cent relative to a year earlier, and a similar year-on-year rise in the volume of goods exports in October and November. Exports from the automotive sector have been particularly strong, while exports of industrial supplies began to grow more slowly towards the end of last year. Import growth, on the other hand, has been extremely weak, so that the slight upward revision to our estimate of US growth in 2007, to 2.2 per cent from 2 per cent three months ago, has done little to sustain the rest of the world.
Available information on economic activity in December 2007 has been more disappointing, pointing to a softening of growth at the turn of the year. The Federal Reserve Districts' Beige Book points to modest growth in December, with a slowdown reported across all districts relative to November, while several major banks reported profits close to nil in the final quarter of 2007 as a result of the subprime crisis. On top of this, the Conference Board's leading index of US activity and measure of CEO confidence both deteriorated in the final quarter of 2007. While academic studies tend to show that indicators of this type have no predictive power, they are often cited in the media and may have...
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