The US economy added a relatively healthy 2% in Q3 after a revision from the 2.1% reported last month, the Department of Commerce announced Tuesday. The median forecast of 76 economists surveyed by Bloomberg called for a 1.9 percent increase compared with the previously reported 2.1 percent pace. The latest estimate is the third for the quarter and the reading won’t be updated again until annual revisions are issued in July of 2016. The slowdown reflects a cutback in the pace of inventory restocking.
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While that was a sharp deceleration from the brisk 3.9% pace logged in the second quarter, growth remained around the economy’s long-run potential.
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Growth in exports, which have been hurt by the strong dollar and sluggish global demand, were revised to show a slower 0.7 per cent rate of increase. Sustained growth in the USA combined with weakening in other parts of the globe, including in China, could widen the gap between exports and imports in the quarters ahead.
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Economists’ expectation is that the economy is growing at a moderate annual rate of around 2.2 per cent in the current quarter and will accelerate to a 2.3 per cent rate or higher in the first half of next year.
He predicted that the spending gains would be supported by solid hiring, faster pay growth and low energy prices, which would give consumers money to spend on other items. The dollar’s strength is still a major negative factor for many US-based multinationals, severely battered in the foreign markets, where the ongoing “currency wars” have significantly impaired the competitiveness of American goods and services.
A measure of private domestic demand, which excludes trade, inventories and government spending, was revised up one-tenth of a percentage point to a 3.2% pace.
A breakout in consumer spending in the world’s largest economy could help spur growth in the face of slowing demand outside the US, but many consumers feel constrained thanks to modest wage growth and rapidly rising costs for essentials like shelter and medical care.
Nonresidential fixed investment specifically in structures-such as factories, office buildings or energy infrastructure-fell 7.2%, compared to an earlier estimate of a 7.1% drop.
Growth in business spending on equipment was raised to a 9.9 per cent rate from a 9.5 per cent pace.
Housing construction expanded at an 8.2 per cent annual pace and government spending at a 1.8 per cent rate as gains in spending by state and local governments offset cuts in defence spending.
Weaker overseas growth and a strong dollar have weighed on net exports, with trade subtracting 0.3 percentage point from overall growth after adding 0.2 percentage point in the prior three-month period.
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“The U.S. economy is really just chugging along at a fairly middling pace, but it’s enough for the Fed to continue delivering rate hikes”, said Goldberg at TD Securities. In the second quarter, current-dollar GDP rose by 6.1% or $264.4 billion.
