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US growth picks up but consumer spending still weak


US growth picks up but consumer spending still weak


The US economy grew faster than expected between July and September.

Gross domestic product expanded by 2.8 percent from the same period a year earlier. That was better than the 2.5 percent in the second quarter.

GDP was boosted by companies rebuilding their inventories, but business spending slowed, as did consumer spending – which accounts for more than two-thirds of US economic activity.

Consumer spending expanded 1.5 percent, the slowest pace since the second quarter of 2011. It grew 1.8 percent in the April-June period.

Americans are wary of buying given the current jobs situation as the uncertain economic outlook means businesses are cautious about hiring.

The underlying economic weakness explains the Federal Reserve’s decision to stick with its stimulus programme.

It is expected to keep buying 85 billion dollars worth of bonds each month for at least the rest of this year – in order to keep interest rates low.

“The Fed knows the calculation behind GDP and they will see the moderating trend, which is weaker than what the headline suggests,” said Sam Bullard, senior economist at Wells Fargo Securities. “They will take that into consideration. This is not a game-changer for people’s forecast for fourth-quarter GDP and the Fed’s policy outlook.”

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