WASHINGTON: The US economy grew at a fairly healthy clip in the third quarter as strong consumer and business spending offset efforts by businesses to reduce an inventory glut, underscoring its resilience despite a raft of headwinds.
Gross domestic product grew at a 2 percent annual pace, instead of the 2.1 percent rate reported last month, the Commerce Department said in its third estimate yesterday.
While that was a sharp deceleration from the brisk 3.9 percent pace logged in the April-June period, growth remained around the economy’s long-run potential.
The Federal Reserve last week raised its benchmark overnight interest rate by 25 basis points to between 0.25 percent and 0.5 percent, the first increase in nearly a decade.
The rate hike was a vote of confidence in the economy, which has been buffeted by slower global demand, a strong dollar and spending cuts in the energy sector.
When measured from the income side, the economy grew at a 2.7 percent pace, not the 3.1 percent rate reported last month, to account for downward revisions to corporate profits.
Businesses accumulated US$85.5 billion worth of inventory in the third quarter, instead of the US$90.2 billion reported in November. That meant the change in inventories sliced off 0.71 percentage points from third-quarter GDP growth, instead of the 0.59 percentage points the government estimated last month.
A record increase in inventories in the first half of the year left warehouses bulging with unsold merchandise and businesses with little appetite to restock.
Despite efforts to whittle down the stockpiles of unsold goods, inventories remain relatively high and will probably be a drag on growth in the fourth quarter. Estimates for fourth-quarter growth are currently around a 2 percent rate.
