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| Version 17 | Version 18 |
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| US economic growth slows sharply to 1.5% - as it happened | US economic growth slows sharply to 1.5% - as it happened |
| (7 months later) | |
| 3.16pm GMT | 3.16pm GMT |
| 15:16 | 15:16 |
| Summary: US growth slows as firms cut back | Summary: US growth slows as firms cut back |
| If you’re just tuning in, here’s what you need to know about the slowing US economy: | If you’re just tuning in, here’s what you need to know about the slowing US economy: |
| US economic growth braked sharply in the third quarter as businesses cut back on restocking warehouses to work off an inventory glut, but solid domestic demand could encourage the Federal Reserve to raise interest rates in December. | US economic growth braked sharply in the third quarter as businesses cut back on restocking warehouses to work off an inventory glut, but solid domestic demand could encourage the Federal Reserve to raise interest rates in December. |
| Gross domestic product increased at a 1.5% annual rate after expanding at a 3.9% clip in the second quarter, the Commerce Department said on Thursday. The inventory drag, however, is likely to be temporary and economists expect growth to pick up in the fourth quarter given strong domestic fundamentals. | Gross domestic product increased at a 1.5% annual rate after expanding at a 3.9% clip in the second quarter, the Commerce Department said on Thursday. The inventory drag, however, is likely to be temporary and economists expect growth to pick up in the fourth quarter given strong domestic fundamentals. |
| The Fed on Wednesday described the economy as expanding at a “moderate” pace and put a December rate hike on the table with a direct reference to its next policy meeting. The US central bank has kept benchmark overnight interest rates near zero since December 2008. | The Fed on Wednesday described the economy as expanding at a “moderate” pace and put a December rate hike on the table with a direct reference to its next policy meeting. The US central bank has kept benchmark overnight interest rates near zero since December 2008. |
| The economy has struggled to sustain a faster pace of growth since the end of the 2007-2009 recession, with average yearly growth failing to break above 2.5%. Economists had forecast GDP expanding at a 1.6% rate in the third quarter. | The economy has struggled to sustain a faster pace of growth since the end of the 2007-2009 recession, with average yearly growth failing to break above 2.5%. Economists had forecast GDP expanding at a 1.6% rate in the third quarter. |
| Businesses accumulated $56.8bn worth of inventory in the third quarter, the smallest since the first quarter of 2014 and down sharply from $113.5bn in the April-June period. The small inventory build sliced off 1.44 percentage points from third-quarter GDP growth, the largest since the fourth quarter of 2012. | Businesses accumulated $56.8bn worth of inventory in the third quarter, the smallest since the first quarter of 2014 and down sharply from $113.5bn in the April-June period. The small inventory build sliced off 1.44 percentage points from third-quarter GDP growth, the largest since the fourth quarter of 2012. |
| The blow from inventories was blunted by bullish consumers, who are getting a tailwind from cheaper gasoline and firming housing and labor markets. | The blow from inventories was blunted by bullish consumers, who are getting a tailwind from cheaper gasoline and firming housing and labor markets. |
| Consumer spending, which accounts for more than two-thirds of US economic activity, grew at a 3.2% rate after expanding at a 3.6% pace in the second quarter. A measure of private domestic demand, which excludes trade, inventories and government spending, rose at a sturdy 3.2% pace..... | Consumer spending, which accounts for more than two-thirds of US economic activity, grew at a 3.2% rate after expanding at a 3.6% pace in the second quarter. A measure of private domestic demand, which excludes trade, inventories and government spending, rose at a sturdy 3.2% pace..... |
| Here’s the full story: | Here’s the full story: |
| And that’s probably a good time to wind up this blog. Back tomorrow for more of the same. Cheers. GW | And that’s probably a good time to wind up this blog. Back tomorrow for more of the same. Cheers. GW |
| 3.08pm GMT | 3.08pm GMT |
| 15:08 | 15:08 |
| This GDP report doesn’t resolve the confusion over when US interest rates will rise. | This GDP report doesn’t resolve the confusion over when US interest rates will rise. |
| Although growth slowed, the economy doesn’t look weak enough to rule out a hike this year. | Although growth slowed, the economy doesn’t look weak enough to rule out a hike this year. |
| Our economics editor Larry Elliott explains: | Our economics editor Larry Elliott explains: |
| Forward-looking surveys have been signalling a slowdown, the strong dollar is hitting corporate profits, business investment is growing at only just over 2%, and inflationary pressure eased in the third quarter. | Forward-looking surveys have been signalling a slowdown, the strong dollar is hitting corporate profits, business investment is growing at only just over 2%, and inflationary pressure eased in the third quarter. |
| The US central bank would have known what the growth figures were before it met this week. It clearly wants to leave all options open, not least even though a move before the end of the year would probably require a big jump in non-farm payrolls – the key measure of the health of the labour market – in the next couple of months. | The US central bank would have known what the growth figures were before it met this week. It clearly wants to leave all options open, not least even though a move before the end of the year would probably require a big jump in non-farm payrolls – the key measure of the health of the labour market – in the next couple of months. |
| 2.56pm GMT | 2.56pm GMT |
| 14:56 | 14:56 |
| Today’s growth figures look better if you ignore the fact that US companies reduced their spending on inventory-building. | Today’s growth figures look better if you ignore the fact that US companies reduced their spending on inventory-building. |
| Capital Economics explains: | Capital Economics explains: |
| The slowdown in GDP growth to 1.5% annualised in the third quarter, from a very strong 3.9% in the second, was mainly due to a big drag from inventories, which subtracted 1.4% points after making a neutral contribution in the previous quarter. | The slowdown in GDP growth to 1.5% annualised in the third quarter, from a very strong 3.9% in the second, was mainly due to a big drag from inventories, which subtracted 1.4% points after making a neutral contribution in the previous quarter. |
| The growth rate of final sales to domestic purchasers, a better gauge of underlying demand that strips out inventories and net external demand, was still as high as 2.9% in the third quarter. | The growth rate of final sales to domestic purchasers, a better gauge of underlying demand that strips out inventories and net external demand, was still as high as 2.9% in the third quarter. |
| 2.45pm GMT | 2.45pm GMT |
| 14:45 | 14:45 |
| Alasdair Cavalla, economist at the Centre for Economics and Business Research, believes the Federal Reserve won’t be deterred from hiking rates in December by today’s report. | Alasdair Cavalla, economist at the Centre for Economics and Business Research, believes the Federal Reserve won’t be deterred from hiking rates in December by today’s report. |
| He says: | He says: |
| This is a disappointing result for the world’s largest economy, but not disastrous. The rate was expected to fall given evidence from reduced hiring activity compared to earlier in the year, while leading indicators corroborated the slowdown.... | This is a disappointing result for the world’s largest economy, but not disastrous. The rate was expected to fall given evidence from reduced hiring activity compared to earlier in the year, while leading indicators corroborated the slowdown.... |
| Yesterday the Federal Reserve revised its guidance. It was interpreted to mean a rate rise in December, barring disastrous domestic performance before then, regardless of what happens in the global economy. (The last proviso had been in doubt.) Today’s slowdown was as expected – something the Fed would have no doubt known yesterday. We maintain our expectation of a December rate rise. | Yesterday the Federal Reserve revised its guidance. It was interpreted to mean a rate rise in December, barring disastrous domestic performance before then, regardless of what happens in the global economy. (The last proviso had been in doubt.) Today’s slowdown was as expected – something the Fed would have no doubt known yesterday. We maintain our expectation of a December rate rise. |
| Updated | Updated |
| at 2.53pm GMT | at 2.53pm GMT |
| 2.43pm GMT | 2.43pm GMT |
| 14:43 | 14:43 |
| A reminder that this recovery is historically rather weak: | A reminder that this recovery is historically rather weak: |
| US Real GDP growth during the current expansion: 2.2%. Slowest growth recovery in history. pic.twitter.com/bgygrU1Tbz | US Real GDP growth during the current expansion: 2.2%. Slowest growth recovery in history. pic.twitter.com/bgygrU1Tbz |
| US Nominal GDP Growth (YoY) falls to 2.9%. In the past, nominal growth has never been this low outside of recession. pic.twitter.com/q5Rj3YvM9A | US Nominal GDP Growth (YoY) falls to 2.9%. In the past, nominal growth has never been this low outside of recession. pic.twitter.com/q5Rj3YvM9A |
| 1.57pm GMT | 1.57pm GMT |
| 13:57 | 13:57 |
| It’s quite possible that US growth will bounce back this autumn. | It’s quite possible that US growth will bounce back this autumn. |
| Sky News reckons the slowdown between July and September is a temporary affair: | Sky News reckons the slowdown between July and September is a temporary affair: |
| The slowdown was blamed on businesses in the manufacturing, wholesale and retail sectors reducing unwanted stockpiles or deciding not to restock heavily, taking 1.4 percentage points from the third quarter’s growth. | The slowdown was blamed on businesses in the manufacturing, wholesale and retail sectors reducing unwanted stockpiles or deciding not to restock heavily, taking 1.4 percentage points from the third quarter’s growth. |
| However, economists expect that to be a blip - with GDP growth picking up in the current fourth quarter given the looming holiday season, low inflation and stronger wage growth and hiring. | However, economists expect that to be a blip - with GDP growth picking up in the current fourth quarter given the looming holiday season, low inflation and stronger wage growth and hiring. |
| Some argue that healthy levels of consumer spending give the Federal Reserve the scope to raise its benchmark interest rate at its next meeting in December..... | Some argue that healthy levels of consumer spending give the Federal Reserve the scope to raise its benchmark interest rate at its next meeting in December..... |
| US Econony Endures Sharp Summer Slowdown https://t.co/YXqGSybRpu pic.twitter.com/uw9ejSVQqb | US Econony Endures Sharp Summer Slowdown https://t.co/YXqGSybRpu pic.twitter.com/uw9ejSVQqb |
| 1.50pm GMT | 1.50pm GMT |
| 13:50 | 13:50 |
| Shares are dipping at the start of trading in New York, as investors ponder the health of the US economy. | Shares are dipping at the start of trading in New York, as investors ponder the health of the US economy. |
| The Dow Jones industrial average has dropped 35 points, or 0.2%, to 17,743 after the opening bell - which was rung by a musical star: | The Dow Jones industrial average has dropped 35 points, or 0.2%, to 17,743 after the opening bell - which was rung by a musical star: |
| The amazing James Monroe Iglehart (Genie in Broadway's "Aladdin") rings the @NYSE bell today $DIS pic.twitter.com/KNgQZkExui | The amazing James Monroe Iglehart (Genie in Broadway's "Aladdin") rings the @NYSE bell today $DIS pic.twitter.com/KNgQZkExui |
| I fear Genie didn’t dole out any free wishes to the trading floor, alas | I fear Genie didn’t dole out any free wishes to the trading floor, alas |
| 1.35pm GMT | 1.35pm GMT |
| 13:35 | 13:35 |
| James Knightley of ING says the detail of today’s report isn’t all bad: | James Knightley of ING says the detail of today’s report isn’t all bad: |
| Inventories was a huge drag, subtracting 1.44 percentage points from growth. Investment in non-residential structures was down 4%, but everything else grew and net exports didn’t really take anything away either. | Inventories was a huge drag, subtracting 1.44 percentage points from growth. Investment in non-residential structures was down 4%, but everything else grew and net exports didn’t really take anything away either. |
| 1.33pm GMT | 1.33pm GMT |
| 13:33 | 13:33 |
| Here’s Chris Williamson of Markit on today’s growth figures: | Here’s Chris Williamson of Markit on today’s growth figures: |
| “In particular, third quarter GDP was dragged down by a far smaller accumulation of inventories than in the second quarter, which is estimated to have reduced growth by 1.4%. This could therefore reverse in the fourth quarter as stock levels are rebuilt. | “In particular, third quarter GDP was dragged down by a far smaller accumulation of inventories than in the second quarter, which is estimated to have reduced growth by 1.4%. This could therefore reverse in the fourth quarter as stock levels are rebuilt. |
| “The composition of growth was also noteworthy from a policy perspective. As expected, exports acted as drag on growth, reflecting sluggish demand in overseas markets and the dollar’s appreciation, as did the energy sector, which is slashing capacity due to falling prices. But, importantly, consumer spending remained robust, with growth of expenditure merely easing from 3.6% in the second quarter to 3.2% and hinting at only a modest slowing of demand in the domestic economy. | “The composition of growth was also noteworthy from a policy perspective. As expected, exports acted as drag on growth, reflecting sluggish demand in overseas markets and the dollar’s appreciation, as did the energy sector, which is slashing capacity due to falling prices. But, importantly, consumer spending remained robust, with growth of expenditure merely easing from 3.6% in the second quarter to 3.2% and hinting at only a modest slowing of demand in the domestic economy. |
| 1.20pm GMT | 1.20pm GMT |
| 13:20 | 13:20 |
| Here’s a breakdown of the key points in the US GDP report: | Here’s a breakdown of the key points in the US GDP report: |
| Updated | Updated |
| at 1.52pm GMT | at 1.52pm GMT |
| 1.13pm GMT | 1.13pm GMT |
| 13:13 | 13:13 |
| The US economy has now grown for six quarters in a row, since suffering a shock contraction during the bad winter of early 2014. | The US economy has now grown for six quarters in a row, since suffering a shock contraction during the bad winter of early 2014. |
| Economic Growth in US cools as companies rein in inventories. US Q3 misses: 1.5% vs 1.6% exp https://t.co/jM7BcZP1eB pic.twitter.com/HocRg7cyQ1 | Economic Growth in US cools as companies rein in inventories. US Q3 misses: 1.5% vs 1.6% exp https://t.co/jM7BcZP1eB pic.twitter.com/HocRg7cyQ1 |
| 1.06pm GMT | 1.06pm GMT |
| 13:06 | 13:06 |
| The Financial Times have helpfully drawn a barchart showing US annualised growth over the last 14 quarters (from their news story, here) | The Financial Times have helpfully drawn a barchart showing US annualised growth over the last 14 quarters (from their news story, here) |
| 12.58pm GMT | 12.58pm GMT |
| 12:58 | 12:58 |
| We’ve also got data showing that consumer inflation in the US fell during the last quarter. | We’ve also got data showing that consumer inflation in the US fell during the last quarter. |
| The personal consumption expenditure (PCE) fell to 1.2%, down from 2.1% in the second quarter. | The personal consumption expenditure (PCE) fell to 1.2%, down from 2.1% in the second quarter. |
| Dan Alpert, Managing Partner of New York investment bank Westwood Capital. says it suggests the economy is cooling. He’s not impressed with the growth figures either: | Dan Alpert, Managing Partner of New York investment bank Westwood Capital. says it suggests the economy is cooling. He’s not impressed with the growth figures either: |
| #GDP: Meh, tending to yuck. Consumers consuming sorta respectably. PCE Price index falls more to 1.2%. In normal times #Fed w/be cutting now | #GDP: Meh, tending to yuck. Consumers consuming sorta respectably. PCE Price index falls more to 1.2%. In normal times #Fed w/be cutting now |
| 12.52pm GMT | 12.52pm GMT |
| 12:52 | 12:52 |
| Bloomberg’s Carl Riccadonna reckons this growth report suggests US interest rates should remain at their current record low: | Bloomberg’s Carl Riccadonna reckons this growth report suggests US interest rates should remain at their current record low: |
| Overall, GDP growth slipped from 2.7% to 2.0%--this will not give the Fed confidence that time is right for liftoff. | Overall, GDP growth slipped from 2.7% to 2.0%--this will not give the Fed confidence that time is right for liftoff. |
| 12.48pm GMT | 12.48pm GMT |
| 12:48 | 12:48 |
| This excellent spreadsheet shows which parts of the US economy grew in the last quarter (in green) and which shrank (in red): | This excellent spreadsheet shows which parts of the US economy grew in the last quarter (in green) and which shrank (in red): |
| Contributions to Percent Change in Real GDP: pic.twitter.com/CvGztxe6CW | Contributions to Percent Change in Real GDP: pic.twitter.com/CvGztxe6CW |
| It highlights that consumer spending gave the biggest positive bump to the US economy in the last three months. | It highlights that consumer spending gave the biggest positive bump to the US economy in the last three months. |
| Updated | Updated |
| at 12.48pm GMT | at 12.48pm GMT |
| 12.45pm GMT | 12.45pm GMT |
| 12:45 | 12:45 |
| The US has grown by an average of 2% so far this year -- is that really enough to justify a rate hike in December? | The US has grown by an average of 2% so far this year -- is that really enough to justify a rate hike in December? |
| #US GDP at 1.5% in Q3 leaving average quarterly growth so far this year at a rather modest 2% - we are at or a even a little below trend | #US GDP at 1.5% in Q3 leaving average quarterly growth so far this year at a rather modest 2% - we are at or a even a little below trend |
| If you're counting, GDP growth has averaged 2 percent through first three quarters of 2015. Another solid year, not a breakout year. | If you're counting, GDP growth has averaged 2 percent through first three quarters of 2015. Another solid year, not a breakout year. |
| Updated | Updated |
| at 12.49pm GMT | at 12.49pm GMT |