It is clearly only a question of time until the Federal Reserve increases interest rates from their current, historically low, level. There is an increasingly large body of opinion that thinks rates will be raised during the December meeting of the Federal Reserve. This likelihood will have been bolstered by an upwards revision of America’s Q3 economic performance.

The quarterly estimate of GDP is subject to two revisions as more complete data becomes available, usually the initial estimate proves to be quite reliable. However, the initial reading of Q3 growth came in at 1.5% and this has been revised upwards significantly to 2.1% (values are expressed on an annualized basis). The reason underlying the positive revision is that businesses appear to have restocked inventories at a faster rate than originally thought. However, business investment did slow from 5.2% in Q2 to 3.4% in Q3. This was ascribed, partially, at least, to a reduction of investment in the oil and gas exploration sector due to the weak oil price which makes exploitation of more marginal field uneconomic in the current climate.

On the negative side of the equation, consumer spending softened in the revised data. The figure was adjusted downwards from 3.2% to 3%, but coupled with good job creation data for last month; it is unlikely to weigh against a Fed decision to raise rates in December of itself. Equally, while US exporters will be unhappy to see a rate hike since it will boost an already strong Dollar and make their products more costly in importing markets, the dominant term in the UK economy is domestic demand which accounts for about 70% of US output.