 "Q3 estimate shows US economy growing at 2%")
The government revised its estimate of economic growth in the third quarter down slightly on Tuesday, as consumer spending helped sustain a modest growth rate despite a dip in net exports caused in part by the stronger dollar.
"The Achilles heels of the second half of 2015 are inventories and trade, which remain a drag on growth," said Diane Swonk, chief economist at Mesirow Financial in Chicago. "The good news is that consumers are showing a willingness to carry the economy into the new year."
At an annualised rate of two per cent, the pace of expansion in the third quarter was not far out of line with the slow but steady gains registered since the recovery began in mid-2009. Last year, the United States economy - as measured by changes in gross domestic product adjusted to eliminate the effects of inflation - grew by 2.4 per cent. In 2013, it expanded at a 1.5 per cent rate.
After a big build-up of goods in warehouses and on shelves in the first half of 2015, inventories proved to be a headwind in the third quarter. Businesses have been cautious about spending, while plunging oil prices have prompted energy companies to cut back on new investments. A weaker trade balance also exerted pressure, reducing growth by 0.3 per centage point.
In a separate report on Tuesday, the National Association of Realtors reported that sales of existing homes fell by 10.5 per cent in November, an unexpected plunge that the group and private economists attributed to the start of new government rules that may have slowed down mortgage closings.
"We expect delayed sales activity to be recouped in coming months as the real estate industry adjusts to these new regulations," Barclays said in a note to clients on Tuesday.
For all the blows the economy has absorbed in recent years, it has maintained a remarkably even keel.
Consumer demand, which accounts for nearly 70 per cent of economic activity, has been rising at a rate of roughly 3 per cent. Similarly, employers continue to hire at a steady pace and average hourly earnings are showing signs of life after years of stagnation.
Nariman Behravesh, chief economist at IHS, said he was struck by a seemingly obscure but telling data point in the third quarter report: a 2.9 per cent increase in final sales to domestic purchasers, which strips out the negative impact of inventory changes and net exports.
"That's a very respectable top line figure," he said. "The economy's underlying growth rate is more in the neighbourhood of 3 per cent than 2 per cent."
Economists expect the growth rate in the current fourth quarter to be similar to that of the third quarter, with the economy's rate of expansion for 2015 expected to be just over 2 per cent.
One major source of weakness recently has been the strong dollar, said Torsten Slok, chief international economist for Deutsche Bank Securities in New York. The dollar's rise hurts American companies by making American exports more expensive for overseas buyers. At the same time, the picture for growth in both Asia and Europe remains cloudy.
"Employment has been holding up but the big economic story has been downward pressure from a strong dollar," Mr. Slok said. "And the rest of the world, unfortunately, is still weak."
Indeed, last week's interest rate increase by the Federal Reserve, which came as some other central banks overseas were maintaining more accommodative monetary policies, could push the dollar even higher.
"The negative effect from inventories is temporary," Mr. Behravesh said, "but weak exports will be part of the US picture for at least another year or two."
Tuesday's revision is the last of three estimates by the Commerce Department of economic growth in July, August and September. The downward adjustment had been expected, with economists predicting before the report that growth would be revised down to 1.9 per cent.
The first estimate, in October, showed growth of 1.5 per cent. That was revised upward to 2.1 per cent last month.
A fresher take on the economy's prospects will come on Wednesday, when the Commerce Department reports data for consumer spending and income in November. Economists are forecasting a pickup in spending, with incomes growing more modestly.
©2015 The New York Times News Service
