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December 17, 2009

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US data show slow growth for economy

THE United States economy is weak enough to keep inflation in check but strong enough to increase the pace of home construction and raise hopes for a sustained recovery.

That was the picture drawn yesterday by government data showing an economy growing, however slowly.

Higher energy prices sent overall consumer prices higher in November. But after stripping out volatile energy and food prices, inflation disappeared last month. That gives the Federal Reserve, ending a two-day meeting yesterday, leeway to hold its key interest rate at a record low to aid the recovery.

At the same time, home construction rebounded in November after a setback in October. And applications for new building permits - a gauge of future activity - rose more than economist had predicted. A housing recovery is critical to helping nurture the overall economy.

Also yesterday, the government said its broadest measure of foreign trade posted a sharp increase in the July-September quarter, signaling higher demand for foreign goods. That, too, is seen as a sign of a strengthening economy.

The current account is the broadest measure of trade because it includes not only trade in goods and services but also investment flows among countries.

The Consumer Price Index, the most closely watched inflation gauge, rose 0.4 percent in November, up from a 0.3-percent increase in October, the US Labor Department said.

But "core" inflation, which excludes energy and food, was flat, signaling that inflation isn't rising through the economy. It was the first time core inflation was flat after 10 straight monthly increases.

In the months ahead, firms will find it difficult to jack up prices when consumers are set to stay cautious, the job market is weak and the recovery is slow, analysts say.


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