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| US economic growth greater than estimated but figure remains modest | US economic growth greater than estimated but figure remains modest |
| (35 minutes later) | |
| The key measure of the US economy was revised from bleh to meh on Tuesday as businesses restocked goods at a stronger pace than first thought, adding to the likelihood of an historic US rate rise next month. | |
| The overall economy, as measured by the gross domestic product (GDP), grew at an annual rate of 2.1% in the July-September period, the Commerce Department reported, up from a previously estimated growth of 1.5%. | The overall economy, as measured by the gross domestic product (GDP), grew at an annual rate of 2.1% in the July-September period, the Commerce Department reported, up from a previously estimated growth of 1.5%. |
| Related: US jobs data smash forecasts and send dollar soaring – as it happened | Related: US jobs data smash forecasts and send dollar soaring – as it happened |
| Even with the revision, economic growth slowed sharply from a 3.9% gain in the second quarter when the economy was rebounding from an unusually harsh winter that had sapped first quarter growth to a barely discernible 0.6% pace. | Even with the revision, economic growth slowed sharply from a 3.9% gain in the second quarter when the economy was rebounding from an unusually harsh winter that had sapped first quarter growth to a barely discernible 0.6% pace. |
| The latest revision to GDP comes as the Federal Reserve considers its first interest rate hike since 2006. The Fed chair, Janet Yellen, signalled to Congress earlier this month that a rate rise was on the table when the federal open markets committee meets next in December. | The latest revision to GDP comes as the Federal Reserve considers its first interest rate hike since 2006. The Fed chair, Janet Yellen, signalled to Congress earlier this month that a rate rise was on the table when the federal open markets committee meets next in December. |
| The odds of a rate rise are increasing as economists forecast that a continuing rebound in the jobs market and falling gas prices will fuel consumer spending and push GDP growth in the current quarter to 2.5% or better. | The odds of a rate rise are increasing as economists forecast that a continuing rebound in the jobs market and falling gas prices will fuel consumer spending and push GDP growth in the current quarter to 2.5% or better. |
| Overall, economic growth has hovered around a modest 2% rate for the past several years. The sluggish upward pace of has failed to pick up any real momentum since the end of the recession in 2009. | Overall, economic growth has hovered around a modest 2% rate for the past several years. The sluggish upward pace of has failed to pick up any real momentum since the end of the recession in 2009. |
| PNC senior economist Gus Faucher said slow but steady growth was not necessarily a bad thing. “Although the recovery from the Great Recession has been disappointing at times, the positive flip side is that a six-year run of moderate growth has prevented the economy from overheating. There do not appear to be any serious imbalances in the domestic economy that would indicate a recession any time soon, although the global outlook is a downside risk,” he said. | PNC senior economist Gus Faucher said slow but steady growth was not necessarily a bad thing. “Although the recovery from the Great Recession has been disappointing at times, the positive flip side is that a six-year run of moderate growth has prevented the economy from overheating. There do not appear to be any serious imbalances in the domestic economy that would indicate a recession any time soon, although the global outlook is a downside risk,” he said. |
| A slowdown in stockpiling trimmed growth in the third quarter but less than the government had first estimated a month ago. Consumer spending - which represents more than two thirds of GDP - rose at a 3% rate. But a key measure of corporate profits dropped 1.1% as a stronger dollar and weaker global demand took their toll. The government will make one final estimate of GDP in the summer next month. | |
| A quartet of high-profile data releases are due between now and the Fed’s meeting on December 15-16. Yellen and her fellow committee members will have the chance to digest November’s employment situation (non-farm payrolls) report, retail sales figures for the start of the holiday shopping season as well as data on foreign trade and industrial production, before making a final decision. | |
| “This glimpse at the fourth quarter is more valuable than dated information about revisions to third-quarter GDP,” IHS chief economist Nariman Behravesh wrote in a note to clients. “Better GDP news, even if old news, will not prevent the Federal Reserve from raising interest rates in December as we still expect.” |