WASHINGTON —
The U.S. economy grew at a 2.7 percent annual rate from July through September, much faster than first thought. The strength is expected to fade in the final months of the year because of the impact of Superstorm Sandy and uncertainty about looming tax increases and government spending cuts.
The Commerce Department said Thursday that growth in the third quarter was significantly better than the 2 percent rate estimated a month ago. And it was more than twice the 1.3 percent rate reported for the April-June quarter.
The main reason for the upward revision to the gross domestic product was businesses restocked at a faster pace than previously estimated. That offset weaker consumer spending growth.
GDP measures the nation’s total output of goods and services — from restaurant meals and haircuts to airplanes, appliances and highways.
Most economists say economic growth is slowing to below 2 percent in the current October-December quarter. That’s generally considered too weak to rapidly lower the unemployment rate.
Paul Ashworth, chief U.S. economist at Capital Economics, said companies are likely restocking more slowly now. Businesses typically cut back on restocking when they think consumers will spend less. Consumer spending drives roughly 70 percent of economic activity.
Economists cite two reasons for the anticipated weakness in consumer and business spending.
Superstorm Sandy halted business activity along the East Coast in late October and November. And spending may weaken in the final weeks of the year, if lawmakers and Obama fail to reach a deal to avoid the “fiscal cliff.” That’s the name for sharp tax increases and spending cuts that would occur in January without a deal.
Companies are “likely thinning inventories just in case Congress fails to do its job, which is always a possibility,” said Joel Naroff, chief economist at Naroff Economic Advisors.
A separate report Thursday showed the negative impact of Superstorm Sandy is starting to fade. The number of Americans seeking unemployment benefits fell 23,000 to a seasonally adjusted 393,000 last week, the Labor Department said. It was the second straight drop after Superstorm Sandy had driven applications to 451,000 three weeks ago.
Still, consumers and businesses appeared to be more cautious over the summer, according to the GDP report.
Consumer spending grew at a weaker 1.4 percent rate in the third quarter, down from the 2 percent rate estimated a month ago and nearly in line with the 1.5 percent rate in the second quarter.
Businesses spending on equipment and software fell at an annual rate of 2.7 percent in the third quarter, the first decline since the depths of the recession in April-June 2009.
The report showed continued strength in homebuilding, which rose at an annual rate of 14.2 percent. And government spending expanded at an annual rate 3.5 percent, marking its first positive contribution to overall economic growth in two years. The increase was driven by a big jump in defense spending.
While economists predict slower growth in the final months of the year, several reports suggest economic activity picked up in October and early November. And if Congress and the White House reach agreement and avoid the fiscal cliff, economic growth could accelerate next year, many economists say.
A Federal Reserve survey released Tuesday showed improved consumer spending and steady home sales helped lift growth from October through early November in most parts of the United States. The one exception was the Northeast, where the storm led to widespread disruptions.
The Labor Department said employers added 171,000 jobs last month and hiring in September and August was stronger than previously thought.
Rising home values, more hiring and lower gas prices pushed consumer confidence in November to the highest level in nearly five years, according to the Conference Board.
A better mood among consumers appears to have encouraged businesses to invest more in October after pulling back over the summer.
There are already signs that consumer optimism is leading to more spending. A record number of Americans visited stores and shopping websites over the four-day Thanksgiving weekend, according to a survey by the National Retail Federation.
National News
Related Photos
Discussion
US economy grew at 2.7 percent rate in summer
- National News
-
-
Reputed Mafioso tip triggers new Hoffa body search
The FBI saw enough merit in a reputed Mafia captain’s tip to once again break out the digging equipment to search for the remains of former Teamsters union leader Jimmy Hoffa, last seen alive before a lunch meeting with two mobsters nearly 40 years ago.
-
Investors look for answers on economy from Fed
Worry and speculation have consumed investors since Chairman Ben Bernanke spoke to Congress last month about the Federal Reserve’s drive to keep long-term interest rates at record lows.
-
Utah man shot in church upgraded to fair condition
It was a quiet part of the Father’s Day Mass as about 300 people stood up in preparation for communion.
-
House committee takes up tough immigration bill
A key committee in the Republican-led House moved Tuesday toward approving a tough enforcement-focused immigration bill, over objections from Democrats and disruptions from protesters shouting “Shame, shame, shame!”
-
Chrysler expected to formally refuse Jeep recall
In one of the biggest-ever showdowns between an automaker and the government, Chrysler on Tuesday is expected to file papers explaining its refusal to recall 2.7 million older Jeep SUVs that are at risk of catching fire in rear-end collisions.
-
Hitchhiking cat ’Mata Hairi’ headed home to Oregon
A well-traveled cat named “Mata Hairi” will soon be reunited with her owner after spending nearly 10 months traveling thousands of miles with a hitchhiker who rescued her from the rain.
-
For young immigrants, a delayed coming of age
As a child, Jorge Tume used to sit and do homework as his parents cleaned the desks and floors of a concrete company in Miami. When he was done, he’d take out the trash and help finish cleaning.
-
Court: Arizona citizenship proof law illegal
The Supreme Court ruled Monday that states cannot on their own require would-be voters to prove they are U.S. citizens before using a federal registration system designed to make signing up easier.
-
Fracking fuels water fights in nation’s dry spots
The latest domestic energy boom is sweeping through some of the nation’s driest pockets, drawing millions of gallons of water to unlock oil and gas reserves from beneath the Earth’s surface.
-
Ten more homes destroyed in Colorado wildfire
Firefighters were finally gaining some ground Friday on a wildfire in which two people were killed as they tried to escape and 389 homes were destroyed.
- More National News Headlines
-
Obama Renews Call for Nuclear Reductions
Raw: Car Jumps Curb in NYC, Injures 8
Obama: 'Lives Have Been Saved' by NSA Programs
Obama: Friction in Afghan Talks No Surprise
Unusual Heat Wave Bakes Alaska
Raw: Massive Protests Fill Brazilian Streets
Raw: German President Welcomes President Obama
Fans Cheer Dramatic Heat Comeback
Raw: Arizona Wildfire Scorches 8 Square Miles
Hoffa Mystery Still Fascinates After 4 Decades
Raw: 1 Dead in Shooting at Mo. Apartment Complex
Raw: Huge Fire Near Yosemite National Park
3 Charged in Ohio With Enslaving Mom, Daughter
Kid Couture: Spending Big Bucks on Babies
