US economy slows to 1.5% growth in third quarter

A fall in exports and private investment saw the US economy growing at a slower pace in the third quarter.
A fall in exports and private investment saw the US economy growing at a slower pace in the third quarter. PHOTO: BLOOMBERG

WASHINGTON (AFP) - The US economy grew at a slower pace in the third quarter as exports and private inventory investment fell, the Commerce Department said Thursday.

Gross domestic product expanded at an annual rate of 1.5 per cent in the July-September period, the department said in its first estimate for the quarter.

The reading came in slightly weaker than analysts expected, but the economy was widely expected to have cooled down from the second quarter's robust 3.9 per cent expansion.

The third-quarter expansion mainly reflected solid consumer spending, which accounts for two thirds of US output, as consumers found themselves with a lot more disposable income than in the second quarter.

Consumer spending rose 3.2 per cent in the third quarter, a bit less than the second quarter's increase. But disposable personal income jumped 3.5 per cent, nearly three times the gain in the second quarter, suggesting a positive set-up to the upcoming holiday shopping season.

A downturn in private inventory investment was a large drag on GDP, the department said, noting declines in investment in wholesale trade and in manufacturing.

Exports rose 1.9 per cent, compared to the 5.1 per cent increase in the second quarter.

Imports, which take away from GDP growth, were also slower, rising 1.8 per cent, nearly half the prior quarter's increase.

The growth data came a day after the Federal Reserve signaled it could raise its near-zero interest rate in December if it decides the economy is strong enough to weather the tightening.

"The slowing had been flagged well in advance by the monthly business surveys and higher frequency data, and is therefore unlikely to have a major impact on policymaking," said Chris Williamson of Markit.

"Instead, the Fed will be firmly focused on how the fourth quarter is playing out, writing off some of the third-quarter weakness as temporary."