US posts slower 2.2% rise in GDP
By Jeannine Aversa |
December 23, 2009, Wednesday
|
Print Edition
Print Edition
THE United States economy grew at a 2.2-percent pace in the third quarter as the recovery got off to a weaker start than previously thought but all signs suggest the economy will end the year on a stronger footing.
The US Commerce Department's new reading on gross domestic product for the July-to-September quarter was slower than the 2.8-percent growth rate estimated just a month ago. Economists were predicting that figure wouldn't be revised in the government's final estimate on third-quarter GDP.
The main factors behind the downgrade: consumers didn't spend as much, commercial construction was weaker, business investment in equipment and software was a bit softer, and companies cut back more on inventories, according to yesterday's report.
Despite the lower reading, the economy managed to finally return to growth during the quarter, after a record four straight quarters of decline. That signaled the deepest and longest recession since the 1930s had ended, and the economy had entered a new fragile phase of recovery.
Many analysts view the economy will finish better in the current quarter.
The economy is probably growing at nearly 4 percent in the October-to-December quarter, analysts say. If they're right, that would mark the strongest showing since 5.4-percent growth in the first quarter of 2006 - well before the recession began. The government will release its first estimate of fourth-quarter economic activity on January 29.
Yet even such growth wouldn't be enough to quickly trim the unemployment rate, now at 10 percent. High unemployment and tight credit for consumers and businesses are expected to continue to weigh on the economic recovery. Many economists predict the economy's growth will slow to a pace of around 2 or 3 percent in the first three months of 2010.
Growth in the final quarter is expected to be driven by companies restocking depleted inventories. Stocks of goods were slashed at a record pace during the recession. So even the smallest pickup in customer demand will force factories to step up production and boost overall economic activity in the final quarter.
Stronger exports to foreign customers and spending by US consumers and businesses also will underpin fourth-quarter growth.
The US Commerce Department's new reading on gross domestic product for the July-to-September quarter was slower than the 2.8-percent growth rate estimated just a month ago. Economists were predicting that figure wouldn't be revised in the government's final estimate on third-quarter GDP.
The main factors behind the downgrade: consumers didn't spend as much, commercial construction was weaker, business investment in equipment and software was a bit softer, and companies cut back more on inventories, according to yesterday's report.
Despite the lower reading, the economy managed to finally return to growth during the quarter, after a record four straight quarters of decline. That signaled the deepest and longest recession since the 1930s had ended, and the economy had entered a new fragile phase of recovery.
Many analysts view the economy will finish better in the current quarter.
The economy is probably growing at nearly 4 percent in the October-to-December quarter, analysts say. If they're right, that would mark the strongest showing since 5.4-percent growth in the first quarter of 2006 - well before the recession began. The government will release its first estimate of fourth-quarter economic activity on January 29.
Yet even such growth wouldn't be enough to quickly trim the unemployment rate, now at 10 percent. High unemployment and tight credit for consumers and businesses are expected to continue to weigh on the economic recovery. Many economists predict the economy's growth will slow to a pace of around 2 or 3 percent in the first three months of 2010.
Growth in the final quarter is expected to be driven by companies restocking depleted inventories. Stocks of goods were slashed at a record pace during the recession. So even the smallest pickup in customer demand will force factories to step up production and boost overall economic activity in the final quarter.
Stronger exports to foreign customers and spending by US consumers and businesses also will underpin fourth-quarter growth.
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