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US sees modest 3rd-quarter growth
By Jeannine Aversa |
December 23, 2010, Thursday
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Print Edition
Print Edition
THE United States economy grew at a moderate pace last summer, reflecting stronger spending by businesses to replenish stockpiles. More recent barometers suggest the economy is gaining momentum in the final months of this year.
Gross domestic product rose at a 2.6 percent annual rate in the July-September quarter, the US Commerce Department said yesterday. That's up from the 2.5 percent pace estimated a month ago. While businesses spent more to build inventories, consumers spent a bit less.
Many analysts predict the economy strengthened in the October-December quarter. They think the economy is growing at a 3.5 percent pace or better mainly because consumers are spending more freely again.
And expectations are even higher for 2011. A payroll tax cut signed into law this month by President Barack Obama will put more money in consumers' pockets.
"Looking ahead, circumstances are ripe for the economy to develop additional traction," said Joshua Shapiro, chief US economist at MFR Inc in New York. He is estimating growth for 2011 to be above 3.5 percent. Some predict growth for all 2011 will be closer to 4 percent.
Even if analysts are right, the economy still won't be growing quickly enough to make a noticeable dent in unemployment. By some estimates, the economy would need to grow by 5 percent for a full year to push down the unemployment rate by a full percentage point. But for all of this year, the economy is expected to expand by only 2.8 percent.
The third-quarter's figure marks an improvement from the feeble 1.7 percent growth logged in the April-June quarter. The economy's growth slowed sharply then. Fears about the European debt crisis roiled Wall Street and prompted businesses to limit their spending.
In the third quarter, greater spending by businesses on replenishing their stocks was the main factor behind the slight upward revision to GDP. That spending added 1.61 percentage points to growth, compared with 1.3 percentage points previously estimated.
Consumers boosted their spending at a 2.4 percent pace. That was down from a 2.8 percent growth rate previously estimated. Even so, consumers hiked their spending at the fastest pace in four years. The slight downward revision reflected less spending on health care and financial services than previously estimated.
Gross domestic product rose at a 2.6 percent annual rate in the July-September quarter, the US Commerce Department said yesterday. That's up from the 2.5 percent pace estimated a month ago. While businesses spent more to build inventories, consumers spent a bit less.
Many analysts predict the economy strengthened in the October-December quarter. They think the economy is growing at a 3.5 percent pace or better mainly because consumers are spending more freely again.
And expectations are even higher for 2011. A payroll tax cut signed into law this month by President Barack Obama will put more money in consumers' pockets.
"Looking ahead, circumstances are ripe for the economy to develop additional traction," said Joshua Shapiro, chief US economist at MFR Inc in New York. He is estimating growth for 2011 to be above 3.5 percent. Some predict growth for all 2011 will be closer to 4 percent.
Even if analysts are right, the economy still won't be growing quickly enough to make a noticeable dent in unemployment. By some estimates, the economy would need to grow by 5 percent for a full year to push down the unemployment rate by a full percentage point. But for all of this year, the economy is expected to expand by only 2.8 percent.
The third-quarter's figure marks an improvement from the feeble 1.7 percent growth logged in the April-June quarter. The economy's growth slowed sharply then. Fears about the European debt crisis roiled Wall Street and prompted businesses to limit their spending.
In the third quarter, greater spending by businesses on replenishing their stocks was the main factor behind the slight upward revision to GDP. That spending added 1.61 percentage points to growth, compared with 1.3 percentage points previously estimated.
Consumers boosted their spending at a 2.4 percent pace. That was down from a 2.8 percent growth rate previously estimated. Even so, consumers hiked their spending at the fastest pace in four years. The slight downward revision reflected less spending on health care and financial services than previously estimated.
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