The Economy

Consumer Spending Buttressed Third Quarter U.S. Economic Growth

“Consumption is a big piece of it, and it’s chugging along.”
Katie Kuehner-HebertDecember 22, 2015

Buttressed by consumer spending, the U.S. economy managed to offset weak global growth to record a third-quarter boost, according to a Bloomberg survey.

The Commerce Department revised  its quarterly growth rate for the U.S. gross domestic product downward to an annualized 2%, from a previously stated 2.1%. The median forecast of 76 economists surveyed by Bloomberg had called for a 1.9% increase.

Household purchases, which account for almost 70% of the economy, rose at a 3% annual pace, due in large part to steady payroll gains and cheap gasoline. Payrolls have advanced at a 210,000 average monthly pace this year through November, compared with a 260,000 average for all of 2014 that was the strongest in 15 years.

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“Consumption is a big piece of it, and it’s chugging along,” Wells Fargo Securities economist Tim Quinlan told Bloomberg. At the same time, “it’s hard to be really enthusiastic about the outlook for trade and business investment” amid weak growth overseas.

Weaker overseas growth and a strong dollar have weighed on net exports, with trade subtracting a 0.3 percentage point from overall growth after adding a 0.2 percentage point in the prior three-month period. Sustained growth in the United States combined with weakening growth in other parts of the globe, including in China, could widen the gap between exports and imports in the quarters ahead.

Inventories subtracted 0.7 percentage points from growth compared with a previous estimate of a 0.6 percentage-point drag. A buildup in stockpiles for much of this year, made worse by weaker-than-expected overseas demand, is still being drawn down.

Corporate spending on equipment advanced at a 9.9% annualized pace, adding a 0.6 percentage point to growth and the biggest gain in a year.

The economy grew at an average pace of 2.3% in the first half of the year after expanding 2.4% in all of 2014.