Sat, Dec 07, 2013 - Page 15 News List

US growth rate of 3.6 percent is fastest this year

UPWARD TREND:The US GDP revision is well above the 2.5 percent rate for the second quarter, but consumer spending is at the weakest level in years

The Guardian, NEW YORK

GDP, the broadest measure of goods and services produced in the economy, grew at a 3.6 percent seasonally adjusted annual rate from July through September, up from an earlier 2.8 percent estimate.

The reading was significantly better than the 3.1 percent economists had predicted and represents the strongest growth rate since the first quarter of last year.

However, the upward revision was driven largely by businesses stockpiling inventory. The inventory gain accounted for almost half of the new growth figure.

Inventory gains are notoriously volatile and economists are already predicting that they may sap growth in the fourth quarter as businesses cut back.

“Still, the economy did have some momentum heading into the government shutdown, and will continue to expand in 2014,” PNC Bank said in a note to investors.

“With less fiscal drag, a better global economy, continued gains in consumer spending, a pickup in business investment, and the ongoing recovery in the housing market, growth in 2014 will be around 2.5 percent, noticeably stronger than the 1.7 percent pace this year,” it said.

The figures come ahead of the release of the latest monthly nonfarm jobs report yesterday.

This week ADP, the payroll processor, said private business had added 215,000 jobs last month, the largest gain of the year.

The economic figures come ahead of a US Federal Reserve meeting scheduled for Dec. 17 and Dec. 18.

The Fed is pumping US$85 billion a month into the US economy through the quantitative easing stimulus program.

It has tied any tapering of the program to falling unemployment and clearer signs of sustainable economic growth.

However, the latest GDP figures present a mixed picture. Apart from the volatile inventory numbers, consumer spending was noticeable weak.

It grew just 1.4 percent during the third quarter, the weakest gain since the recession ended.

Corporate profits increased by 1.8 percent annualized in the third quarter and by 6.4 percent over the year to the third quarter.

“Admittedly, the upward revision to third-quarter growth was largely due to even stronger inventory accumulation, which is now estimated to have added 1.6 percent to overall GDP growth, double the initial estimate,” Capital Economics economist Paul Ashworth said.

“But that inventory building isn’t because sales were disappointing and firms were left with unsold product,” he added.

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