The US economy grew in the third quarter at the fastest pace in a year, as gains in consumer spending and business investment helped support a recovery on the brink of faltering.
Gross domestic product, the value of all goods and services produced, rose at a 2.5 per cent annual rate, matching the median forecast of economists surveyed by Bloomberg News and up from a 1.3 per cent gain in the prior quarter, Commerce Department figures showed on Thursday in Washington. Household purchases, the biggest part of the economy, increased at a more-than-projected 2.4 per cent pace.
Americans last quarter cut savings to boost purchases, as incomes dropped by the most in two years, calling into question the sustainability of the acceleration in sales. With the lack of jobs holding back wages, the Obama administration and Federal Reserve policy makers have proposed additional measures aimed at stimulating growth and hiring.
“While the first half numbers led many to fear something worse, we continue be in a moderate growth recovery,” said Dean Maki, chief US economist at Barclays Capital in New York who, correctly forecast the GDP figures. “Despite the fears consumers are turning more cautious, their spending has actually slightly outpaced their income.”
First-time jobless claims decreased by 2,000 to 402,000 in the week ended October 22, Labor Department figures also showed on Thursday. The number of people collecting unemployment benefits fell in the prior week by 96,000 to 3.65 million, the fewest since September 2008.
Consumer Spending
Sales climbed at an average 2.7 per cent annual rate during the expansion that ended in December 2007.
The gain came at a cost as the savings rate last quarter dropped to 4.1 per cent, the lowest since the last three months of 2007. After-tax incomes adjusted for inflation decreased at a 1.7 per cent annual rate, the biggest drop since the third quarter of 2009.
