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The world’s largest economy expanded at its fastest pace in a year in the three months to the end of September, official figures revealed today.

According to the Commerce Department, the US economy grew at an annualised rate of 2.5% in the third quarter of this year.

The figure was in line with forecasts but was a considerable improvement on the 1.3% growth reported for the second quarter.

Today’s figures will be a welcome boost for the economy which looked set to be heading towards a double dip recession just a few weeks ago.

The strong performance was due to a rise in consumer and business investment spending, as well as international trade.

Consumer spending was the strongest since the fourth quarter of last year, while business spending was the fastest in over a year.

Consumer spending is closely monitored as it accounts for more than two-thirds of economic output.

However, despite today’s encouraging figures, it appears that consumers are still wary about the future direction of the economy.

Earlier this week, the Conference Board revealed US consumer confidence slumped in October.

The closely-monitored Consumer Confidence Index from the Conference Board dived to 39.8 this month from September’s reading of 46.4.

Not only was the reading less than forecasts of a level of 46.0, it was the lowest since March 2009, when the US was in recession.

The economic recovery in the US has so far been sluggish in the face of higher unemployment and a depressed housing market.

Today, however, a separate report from the Labor Department revealed new claims for state unemployment benefits declined by 2,000 last week to a seasonally adjusted 402,000 – suggesting a steady improvement in the labour market.

In addition, yesterday a report suggested house prices were stabilising.

US consumer confidence slumped in October, the Conference Board has reported.

The closely-monitored Consumer Confidence Index from the Conference Board dived to 39.8 this month from September’s reading of 46.4.

Not only was the reading less than forecasts of a level of 46.0, it was the lowest since March 2009, when the US was in recession.

Furthermore, the index remains far away from the 90 points required to show that the world’s largest economy is on solid footing.

Since the index commenced in 1967, the average reading has been 95.6.

The index hit a record high of 144.7 in 2000, while its all-time low was 25.3 in February 2009, when the country was in the midst of recession.

Commenting on the figures, Lynn Franco, director of the Conference Board Consumer Research Centre said: “Consumer confidence is now back to levels last seen during the 2008-2009 recession.

“Consumer expectations, which had improved in September, gave back all of the gain and then some, as concerns about business conditions, the labor market and income prospects increased,” she added.

Meanwhile, the present situation index, a measure of consumers’ assessment of current economic conditions, fell for the sixth month in a row to 26.3 from a revised 33.3 in September.

The report also showed that households are concerned about future incomes – raising doubt over spending – something which is closely monitored as it accounts for more than two-thirds of economic output.

The economic recovery in the US remains sluggish in the face of higher unemployment and a depressed housing market.

In other news this week, the Standard & Poor’s/Case-Shiller index showed that single-family house prices rose by just 0.2% in August on a monthly basis, while prices were 3.8% lower when compared with August 2010.

Overall, a very mediocre/bad day for economic data.

Here’s a quick roundup:

• Case-Shiller fell 3.8% vs. expectations of a 3.5% decline. It was sequentially a slower fall, but still a bummer.
• Consumer Confidence came in at 39.8, a huge fall from last month’s 46.4, and well short of expectations of 46.0.
• The FHFA House Price Index lost 0.1% vs. expectations of 0.2% growth.
• The Richmond Fed Manufacturing Index came in at -6 vs. expectations of +1.

And here’s Nomura on weekly retail spending:

Both weekly retail sales indices weakened in the third week of October. The ICSC-Goldman Sachs weekly chain stores index dropped 0.8% w-o-w and declined to a rate of 2.4% y-o-y from 3.6% in the previous week. Similarly, the Johnson Redbook retail sales index fell from a rate of 4.6% y-o-y to 4.1% last week. Month-to-date, the Redbook index increased 4.5% y-o-y, just shy of the 4.6% target. In the week following the Columbus Day holiday, the weather cooled off, but shoppers were not motivated to buy seasonal apparel. Halloween purchases should pick up in the final week of October as retailers begin to slash prices. Retail gasoline prices fell just a cent in the past week and now stand at an average of $3.46 per gallon, 22.9% higher than last year. Despite a significant drop in the Conference Board’s consumer confidence index for October, buying plans increased slightly: 45.9% of consumers expect to buy major appliances within six months, an increase from 40.8% in September.

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The latest survey from the Nationwide Building Society has revealed a fall in UK consumer confidence for the month of September.

The building society’s consumer confidence index fell for the fourth consecutive month, falling by 3 points to 45 in September – hovering dangerously close to the all-time low of 41.

Furthermore, it is 10 points lower than this time last year and way below the index average of 81.

According to the survey, 80% of consumers believe there will be no improvement in the economy over the next six months.

Commenting on the report, Robert Gardner, Nationwide’s chief economist, said: “The economy has hardly grown in 2011, and pressure has continued to mount on household budgets.”

However, he believes the re-introduction of quantitative easing, announced by the Bank of England, may boost confidence.

“This could translate into improved consumer confidence, if people believe these efforts will be successful in lifting the economy out of its current malaise,” Mr Gardner added.

The survey comes just days after the Office for National Statistics (ONS) revealed Consumer Price Inflation (CPI) accelerated to annual rate of 5.2% last month from August’s rate of 4.5%.

The rate represented the highest since September 2008 and it has never exceeded this rate since the CPI measure was first calculated in 1997.

Furthermore, last week, the ONS revealed UK unemployment rose sharply in the three months to August – rising to a 17-year high.

The ONS said unemployment rose by 114,000 in the three month period to 2.57 million, taking the unemployment rate to 8.1% – higher than forecasts.

Rising inflation and unemployment are putting further pressure on households’ budgets and this is likely to impact on spending, which could weaken economic growth further.

US consumer confidence remained weak in September, the Conference Board has reported.

The closely-monitored Consumer Confidence Index from the Conference Board edged higher to 45.4 this month from August’s upwardly revised reading of 45.2.

However, not only was the reading less than forecasts of a level of 46.6, it was the lowest since April 2009 when the economy was in the midst of a recession.

Furthermore, the index remains far away from the 90 points required to show that the world’s largest economy is on solid footing.

Since the index commenced in 1967, the average reading has been 95.6.

Commenting on the figures, Lynn Franco, director of the Conference Board Consumer Research Centre said: “The pessimism that shrouded consumers last month has spilled over into September. Consumer expectations, which had plummeted in August, posted a marginal gain.

“However, consumers expressed greater concern about their expected earnings, a sign that does not bode well for spending. In addition, consumers’ assessment of current conditions declined for the fifth consecutive month, a sign that the economic environment remains weak.”

This will be a cause for concern since consumer spending is closely monitored as it accounts for more than two-thirds of economic output.

Earlier this month, the Commerce Department revealed retail sales stagnated last month.

Sales were flat from the month earlier after July’s figure was revised down to 0.3% from 0.5%.

However, not only is consumer spending a concern, the economic recovery in the US remains sluggish in the face of higher unemployment and a depressed housing market.

The Labor Department recently revealed the US economy added no new jobs last month, which was a surprise after markets had expected 70,000 new jobs.

This represented the first time since 1945 that there has been a zero payrolls figure after 17,000 jobs were added in the private sector last month but these were cancelled out by 17,000 jobs lost in the public sector.

Meanwhile, in other US news this week, it has been revealed that house prices rose 0.9% in July compared with June when values rose 1.2%.

On an annual basis, however, prices are 4.1% lower.

The US housing market has remained in the doldrums for some time now and many have suggested it is holding back the recovery of the world’s largest economy but the latest figures suggest the housing market may be stabilising.

However, demand for housing in the US remains weak, despite mortgage rates hovering at record lows and falling house prices – the latter due to millions of home repossessions.