US economic growth slows in third quarter

Household spending likely to underpin economy as demand from overseas weakens

WASHINGTON • The economy in the United States expanded at a slower pace in the third quarter as companies took advantage of gains in consumer and business spending to reduce bloated stockpiles.

Gross domestic product grew at a 1.5 per cent annual rate, in line with the 1.6 per cent median forecast of economists surveyed by Bloom-berg, Commerce Department data showed yesterday.

Excluding the biggest swing in inventories in four years, the pace of growth was 3 per cent compared with 3.9 per cent in the previous three months.

Household purchases, buoyed by job and income gains, will probably continue to underpin the world's largest economy even as weaker demand from overseas customers holds back exports and manufacturing. The quick rebalancing of stockpiles to be more in line with domestic demand heading into the holiday season indicates that factory production will soon stabilise, eliminating a source of weakness.

"This number is stronger than it looks," Mr Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, said before the report. "Fourth-quarter economic growth should be faster on the basis of a still-good holiday season, good housing, good consumer spending."

A separate report from the Labour Department yesterday showed that the number of applications for unemployment benefits was little changed last week, hovering near the lowest levels in four decades. Jobless claims rose by 1,000 to 260,000 in the period ended Oct 24.

Commerce Department third-quarter growth estimate showed household purchases, which account for almost 70 per cent of the economy, rose at a 3.2 per cent annual pace compared with a 3.6 per cent pace in the prior three-month period. Personal consumption added 2.2 percentage points to growth.

Stable job growth this year and cheaper prices at the pump have helped cushion Americans' pocketbooks, supporting the household spending that makes up the biggest share of US growth.

While payrolls advanced at a slower pace than forecast in August and last month, the pace of hiring this year has averaged 198,000 a month, beating the annual average of seven of the 10 years through to last year.

Federal Reserve policymakers said at the end of their two-day meeting in Washington on Wednesday that they will consider tightening policy at their next meeting in December, without making a commitment to act this year as the economy continues to expand at a "moderate" pace.

The officials removed a line from last month's meeting statement about global economic and financial developments restraining economic activity and added a reference to the possibility of increasing the rate at the "next meeting" based on "realised and expected" progress in reaching their employment and inflation goals.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 30, 2015, with the headline 'US economic growth slows in third quarter'. Print Edition | Subscribe