US grows faster on restocking pace
Print Edition
THE US economy grew at a slightly faster rate in the summer than previously reported, mainly because businesses restocked their goods at a stronger pace than first thought.
The economy, as measured by the gross domestic product, grew at 2.1 percent annually in the July-September period, the Commerce Department said yesterday. It previously estimated growth of 1.5 percent.
Even with the revision, economic growth slowed sharply from a 3.9 percent gain in the second quarter. The economy then was rebounding from a harsh winter that had sapped first-quarter growth to a barely discernible 0.6 percent pace.
The latest numbers, however, should give the Federal Reserve confidence as it studies an interest rate hike at its next meeting in December. A healthy labor market and falling gas prices are set to fuel consumer spending, pushing GDP growth in the current quarter to 2.5 percent or better, economists forecast.
“Domestic demand in the US economy remains very solid, something that will surely give comfort to the Fed as it ponders its next move,” said Robert Kavcic, senior economist at BMO Capital Markets.
A slowdown in stockpiling cut growth by 0.6 percentage points in the third quarter. But that was an improvement from the government’s first estimate a month ago that reduced inventory stockpiling had cut growth by 1.4 percentage points. The government will make one final estimate of GDP in the summer next month.
While the revision in inventories helped third-quarter growth, this improvement was offset somewhat by slightly slower expansion in consumer spending, which grew at a 3 percent annual rate in the summer. The revision reflected in part weaker spending on mobile phones than initially estimated.
The trade deficit was a bigger drag than initially estimated, trimming growth by 0.2 percentage points, as exports grew by just 0.9 percent in the quarter, down from a 1.9 percent initial estimate. American exports have been held back this year by weakness overseas and a rising value of the dollar, which make US goods less competitive on foreign markets.
Growth in business investment slowed to 3.4 percent in the third quarter, down from 5.2 percent in the second quarter as the category that covers oil and gas exploration plunged at an annual rate of 47.1 percent. This sector has been hurt by the sharp fall in energy prices which has forced big cutbacks at energy firms.
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