US Q3 growth estimate cut


NEW YORK CITY: The US economy grew at 2.0 percent in the third quarter, slightly weaker than previously thought, due to lower exports and business investment on inventories, according to US data on Tuesday (Wednesday in Manila).

The government’s estimate of gross domestic product—the broad measure of the economy’s output of goods and services—edged down from the prior estimate of 2.1 percent.

Analysts described the report as robust, pointing to firm spending on such key categories as consumer spending and housing investment.

“I would characterize it as solid growth,” said Nariman Behravesh, chief economist at IHS.
“Once you get past some of these anomalies having to do with inventories and with weakness overseas, the good news is the domestic parts of the economy are very solid.”

The report overall “does little to change the picture of solid domestic activity offset by weakness abroad,” Barclays said. “Soft global growth and the lagged effects of lower energy prices and a stronger dollar continue to weigh on trade and manufacturing.”

The July to September growth was in line with analyst estimates and marked a slowdown from the 3.9-percent growth in the second quarter.

Personal consumption expenditures, which drive about two-thirds of the activity in the US economy, rose by an estimated 3.0 percent, as previously estimated.

That is below the 3.6 percent in the second quarter, but well above the 1.8 percent in the first quarter.

Some of the bigger factors in the downward revision from the prior estimate included a 0.7-percent drop in business inventories and export growth of just 0.7 percent, down from the prior 0.9 percent, as the strong dollar continued to weigh on trade.

BBVA said the drop in inventories was not worrisome and “suggests that we will see a stronger contribution in 4Q15 as businesses increase production alongside expectations for more robust demand during the holiday shopping season.”

But the drag of the strong dollar “is still lingering and there does not appear to be much upside for net exports in 4Q15 thus far,” BBVA said.

Tuesday’s data came on the heels of the Federal Reserve’s decision last week to lift US interest rates for the first time in nearly a decade, amid growing confidence in the US economic recovery.

However, Fed policy makers emphasized that the US economy still needs the support of loose monetary policy and signaled they would take a gradual approach to further interest rates increases.



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