More signs that the US economy is on the mend

THE number of Americans filing new claims for jobless benefits hit a 31/2-year low last week, bolstering views the economy was gaining momentum, even though third-quarter growth was revised down.

Initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 364,000, the Labour Department said yesterday, the lowest level since April 2008.

The claims data, which covered the survey period for non-farm payrolls, helped to take the sting out of a separate report from the Commerce Department showing that gross domestic product grew at a 1.8 per cent annual rate in the third quarter.

Growth, which had previously been reported to have expanded at a 2.0 per cent pace, was held back by a sharp drop in healthcare spending.

"The employment situation continues to show strong signs of a recovery and goes against the grain of what people felt four months ago," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York.

Even as much of the rest of the world is slowing down and a mild recession is forecast in Europe next year, the US economy remains resilient. The labour market is improving, households continue to spend, home building is picking up and factory output is expanding, putting the economy on course for at least a 3.0 per cent growth pace in the fourth quarter. That would be the fastest pace in 18 months.

Despite the downward revision, last quarter's growth is still a step-up from the April-June period's 1.3 per cent pace.

Meanwhile, a gauge of future economic activity posted a solid increase in November, providing further evidence that the US economy is gaining strength.

The Conference Board said its index of leading economic indicators rose 0.5 per cent in November following a 0.9 per cent gain in October which had been the strongest showing in eight months.

Conference Board economists say the two months of solid gains in the index signalled that the economy was gaining momentum and the risks of a recession were receding.

Separately, a survey released yesterday showed US consumer sentiment improved in December to its highest level in six months as Americans felt better about the economy's prospects for the year ahead.

The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment rose to 69.9 from 64.1 in November. It topped the median forecast of 68.0 among economists polled by Reuters and beat December's preliminary figure of 67.7.

The survey's barometer of current economic conditions rose to 79.6 from 77.6, while the survey's gauge of consumer expectations gained to 63.6 from 55.4.

Across the Atlantic, Britain's economy unexpectedly grew faster than first thought between July and September, thanks to stronger services and construction output, the Office for National Statistics said yesterday.

However, the economy did not grow at all in the second quarter, and economists forecast a sharp slowdown at the end of this year and early in 2012.

The ONS revised third-quarter GDP growth up to 0.6 per cent on the quarter from 0.5 per cent, but left the annual rate of growth unrevised at 0.5 per cent.

However, it revised down second-quarter growth to show stagnation from a previous estimate of a rise of 0.1 per cent. Agencies