Real GDP ballooned at a 1.5 percent clip in the third quarter, down sharply from the second quarter’s 3.9 percent growth but an improvement from the first quarter’s 0.6 percent expansion.
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Public spending contributed 0.3 percentage points to the rate of growth in GDP and should rise after this week´s deal, Pantheon explained. The first look at third-quarter US GDP growth, which was released this morning, shows government spending rising at a 1.7% annual pace in the third quarter, the second consecutive quarter of growth. Companies also reduced spending on oil platforms and commercial buildings.
Growth, though, has been dragged down a long way by one factor: inventories.
A few sectors – technology, health care, finance – are enjoying conditions that echo the booming 1990s.
The advance Q3 GDP estimate comes following a weak September employment summary which reported just 142,000 jobs added during the last month of the third quarter.
After-tax incomes, adjusted for inflation, climbed at a 3.5 per cent annual rate, nearly three times the 1.2 per cent gain in the prior three months.
The U.S. economy is benefiting in the meantime from a still-solid pace of consumer spending, which drives about 70 per cent of economic activity and which analysts expect to continue.
The Fed on Wednesday described the economy as growing at a “moderate” pace and hinted at a December rate increase by making a direct reference to its next policy meeting. Still, consumer demand remained strong, and that coupled with hopes for a pickup in domestic manufacturing amidst low commodity prices, allows for slightly brighter outlook into the fourth quarter.
Overall, growth has been slower in 2015 than the previous year. While it is true that investment in structures slipped 4 percent, this largely appears to be a statistical give-back from the second quarter’s better than 6 percent performance.
Prices: Prices of goods and services purchased by US residents – gross domestic purchases prices – increased 1.3% in the third quarter after increasing 1.5% in the second quarter.
For several months there has been intense debate about when the U.S. central bank will raise interest rates, and now the focus is on its last meeting of the year in December.
Business investment growth cooled to a 2.1% rate in Q3, following a stronger 4.1% in Q2. Had firms merely kept inventories at the same level, the economy would have grown 2.9%, driven once again by another strong increase in consumer spending. So while 2015 has thus far been a step down, it hasn’t been that much worse than the years that immediately preceded it.
Scaling back on the amount they produced to top up their inventories meant the overall growth rate of GDP, announced on Thursday morning, slumped.
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In recent speeches, a few U.S. Federal Reserve officials expected a slower growth in the second half of this year.
