In my mid-year forecast update, before the “credit crunch”, I suggested US economic prospects had improved relative to other major countries. We now know that US GDP rose at annualised rates of 3.8% and 3.9% in the second and third quarters. The US is likely to have grown faster than other G7 economies over the two quarters.

Improved trade performance has been a major component of this strength. Net exports contributed 1.3 percentage points to annualised growth in the second quarter and 1.0 p.p. in the third. This more than offset the direct impact of the housing recession: residential construction subtracted 0.5 and 0.9 p.p. from growth in the two quarters.

Yesterday’s ISM manufacturing survey showed a rise in the index of export orders and a sharp fall in imports. The gap between the two indices reached a 12-year high, suggesting net exports will continue to contribute strongly to GDP growth in the current quarter – see chart.

The “credit crunch” will hit fourth-quarter growth but I remain hopeful that economic weakness will be contained.