Restocking by firms boosts US economy
Print Edition
The US economy grew faster than expected in the third quarter as businesses restocked shelves, but a slowdown in consumer and business spending pointed to an underlying weakness.
Gross domestic product expanded at a 2.8 percent annual rate, the quickest pace since the third quarter of 2012, the US Commerce Department said yesterday. It was an acceleration from 2.5 percent in the second quarter and beat economists’ hopes for a 2 percent rate.
Details of the first estimate of third-quarter GDP were generally weak, with inventories contributing 0.83 percentage point to GDP growth. Excluding inventories, the economy grew 2 percent after expanding at 2.1 percent.
Consumer and business spending growth slowed sharply, lending the report a weak tone and validating the Federal Reserve’s decision to stick to its US$85 billion monthly bond-buying program.
With near-term growth prospects not that bright, a reduction in the purchases, which aim to keep interest rates low, is not expected this year.
Consumer spending, which accounts for more than two-thirds of US economic activity, grew 1.5 percent, the slowest pace since the second quarter of 2011. It grew 1.8 percent in the April-June period.
Some of the slowdown in consumption is attributed to weak demand for utilities because of unseasonably cool weather in the summer. But households have also been wary of loosening their purse strings as the pace of job gains slowed sharply during the quarter.
A separate report from the Labor Department suggested the jobs market continued to gradually improve.
Initial claims for state unemployment benefits fell 9,000 to a seasonally adjusted 336,000 last week. Economists polled by Reuters had expected first-time applications to fall to 335,000 last week.
An uncertain economic outlook is making businesses cautious about ramping up hiring. They are also holding back on spending on capital goods.
Business investment eased, largely due to spending on equipment, which fell for the first time since the third quarter of 2012.
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