Rocky road feared after strong GDP

The third-quarter economy expanded at its fastest pace in four years, but the outlook for the fourth quarter is not nearly as rosy. The third-quarter economy expanded at its fastest pace in four years, growing 4.9%, according to a Department of Commerce report. The figure was revised from a previously estimated rate of 3.9%. It was the strongest quarterly increase since the third quarter of 2003 when the GDP grew at a 7.5% pace. The GDP figure is released three times each much, with more complete information added each month. Consumer spending was revised higher, growing at a 2.7% pace, below the previously estimated 3.0% increase. But looking down the line, David Wyss, chief economist at Standard & Poor's, that the consumer will be squeezed due to falling home prices. Mr. Wyss predicts that fourth-quarter GDP will fall to 1.5%, as consumers spend less, inventories flatten out and capital spending eases. Meanwhile, Sam Stovall, chief investment strategist at Standard & Poor's, predicts that the GDP could fall to 0.6% or lower for the first quarter of 2008, due to a struggling housing market, weaker-than-expected spending and elevated oil prices. In another government report, sales of single-family homes increased 1.7% to a total of 728,000 new homes purchased in October, according to a Department of Commerce report. Revised September new-home sales fell 0.1% to an annual rate of 716,000. The government first estimated that said September sales rose by 4.8% to 770,000. The median price of a new home dropped 8.6% to $217,800 in October from the previous month.