US economy slowed in third quarter to 1.5-per-cent annual growth

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Economic growth slowed in the third quarter in the United States amid a sharp contraction in business inventories, the federal Bureau of Economic Analysis said Thursday.

Gross domestic product grew at an annual rate of 1.5 per cent, according to the bureau’s preliminary estimate.

Second-quarter growth was an annualized 3.9 per cent.

The growth rate was close to Wall Street expectations. An advance survey of 80 economists by Bloomberg Business produced a median forecast of 1.6-per-cent growth.

Household spending, state and local government expenditures, residential and commercial construction and exports all contributed to growth in the 18-trillion-dollar US economy.

The sharp decline in inventory investment – to 56.8 billion dollars, half the amount spent in the April-June quarter – pared more than 1.4 percentage points from annualized growth for the July-September period.

Higher imports weighed on GDP, too.

Third-quarter GDP “reflected the combination of solid domestic demand and volatile transitory factors,” White House economist Jason Furman said. In the last year, slowing global demand “has been a headwind” for the US economy, he said.

The third quarter saw turbulence on global financial markets in August amid a correction in Chinese share prices.

The US Federal Reserve on Wednesday left its benchmark interest rate at an unprecedented near-zero range as the central bank said it continues “monitoring global economic and financial developments.”

The Fed said it would consider the liftoff for interest rates at its next meeting on December 16. The bank’s benchmark interest rate has been near zero since December 2008, when the US was in the depths of its worst economic contraction in 80 years.

The Bureau of Economic Analysis is due to revise its third-quarter GDP estimate on November 24.

Job gains in September fell well below the 2015 average for the second straight month. The unemployment rate remained unchanged at 5.1 per cent, a seven-year-low, and is down from a post-financial crisis peak of 10 per cent in October 2009.

The driving factors in US monetary policy are the labour market and inflation – the Fed’s so-called dual mandate. The baffling absence of inflation in an economy in recovery since 2009 has been a key reason the Fed has balked at interest rate hikes so far this year.

“In determining whether it will be appropriate to raise the target range at its next meeting, the [monetary policy] committee will assess progress – both realized and expected – toward its objectives of maximum employment and 2 per cent inflation,” the Fed said.

“This assessment will take into account a wide range of information, including measures of labour market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”

The consumer price index fell in September compared to August by a seasonally adjusted 0.2 per cent as a drop in oil prices overwhelmed any hint of inflation, the US Bureau of Labour Statistics said. Consumer prices were practically unchanged for the last 12 months.

So-called core inflation, which excludes volatile food and energy prices, was 0.2 per cent in September. For the last 12 months, core prices rose 1.9 per cent.

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